Swiss National Bank bails out Credit Suisse with $54 billion loan

On Thursday, the Swiss National Bank (SNB) agreed to loan approximately $54 billion dollars to the Switzerland-based global investment bank Credit Suisse, which had just experienced an outflow of deposits similar to the recent run on the US-based Silicon Valley Bank, which led to its collapse.

According to ZeroHedge, "Credit Suisse effectively just took out a priming DIP (debtor-in-possession) loan, pledging its last remaining assets with the SNB, to shore up some $54BN in emergency liquidity, probably how much the bank has seen in deposit outflows."

The loan from SNB acted as a last-minute infusion of liquidity and led to shares rising as high as 33 percent on Thursday.

The Associated Press reports that on Wednesday Credit Suisse's shares had fallen by 30 percent, which worried other European banks that if Credit Suisse collapsed it could cause a ripple effect across the international financial system.

Russ Mould, an investment director at AJ Bell, an online investment platform, said, that regulators "don’t want anybody to be the person who sits in a darkened room or darkened cinema and shouts fire, because that’s what prompts a rush for the exits," and are trying to take steps to keep depositors' money safe.

SNB said Wednesday that Credit Suisse, like other "systemically important banks," met the high criteria for their loan. They added that their help was not available to several recently collapsed American banks because their fall did not "pose a direct risk of contagion."

In a statement Credit Suisse said, "Credit Suisse announces its intention to access the SNB’s Covered Loan Facility as well as a short-term liquidity facility of up to approximately CHF 50 billion in aggregate. This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs."

Ulrich Koerner, the Chief Executive of Credit Suisse, said, "These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation."


Image: Title: CreditSuisse


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