Latest SVB collapse: Credit Suisse to borrow £44.5bn after crash amid fears of economic crisis

Credit Suisse plans to borrow up to £44.5bn from Switzerland’s central bank to boost liquidity and reassure investors.

Credit Suisse has plunged and dragged down other major European lenders in the wake of US bank failures.

The lender’s shares fell by around 30 per cent to around £1.42 before recovering to a 24 per cent loss of £1.51 at the close of SIX.

At its lowest point, the price has fallen more than 85 percent since February 2021. “This additional liquidity would support Credit Suisse’s core business and customers as Credit Suisse takes the necessary steps to create a simpler and more focused bank based on customer needs.” said the bank.

Credit Suisse said the loan will be made under a secured loan and short-term liquidity facility, with high-quality assets as collateral.

The bank robbery conjures up images of “It’s a Wonderful Life” with anxious customers huddled together, desperately pleading with the anguished George Bailey for money.

The collapse of Silicon Valley Bank last week caused panic, but it had several other parallels, instead taking place on Twitter, message boards, cell phones, and bank websites.

What made the collapse of Silicon Valley Bank unique compared to the failure of large banks in the past was how quickly it collapsed. Last Wednesday afternoon, the $200 billion bank announced a plan to raise new capital; on Friday morning it was insolvent and under government control.

On Monday, the UK government said HSBC would take over the UK wing of the bank.

But what was SVB, why did it collapse and are other banks at risk? We will analyze these questions here.

Fears that the economy could be on the brink of another “2008-style crisis” sent shares of Europe’s biggest banks plummeting and brought London’s FTSE 100 to its lowest level this year.

The distressed Credit Suisse bank saw its stock fall by as much as a quarter to a new record low, causing its shares to be temporarily suspended from the Swiss market.

Investors were rocked by the collapse of Silicon Valley Bank (SVB) in the US over the weekend, sparking fears about the profitability of Credit Suisse, “too big to fail”.

The Dow Jones Industrial Average closed 280 points (0.87%) lower on Wednesday amid concerns about the future of Credit Suisse, which has a large US and international presence outside its home base in Switzerland.

The S&P ended the day down 0.7% to 3,891.97 and the Nasdaq Composite managed to gain 0.05% to 11,434 by close.

At one point, the Dow fell 725 points and the S&P briefly lost all of that year’s gains.

There was something of a rebound in the afternoon as Swiss regulators announced that the country’s central bank would provide liquidity to Credit Suisse if needed, helping to ease earlier concerns as Reuters reported that Saudi National Bank, the institution’s biggest investor, said it would not can “provide further funding.

Credit Suisse previously said it had detected “certain material weaknesses in our internal control over financial reporting” for 2021 and 2022.

Fears about the bank’s future stem from the crisis that emerged in US regional banks after the collapse of Silicon Valley Bank and Signature Bank over the weekend.

The battered shares of Credit Suisse lost more than a quarter of their value on Wednesday to a record low after their biggest shareholder, the National Bank of Saudi Arabia, told outlets it would not pump more money into the ailing Swiss bank.

The turmoil in the Credit Suisse stock market caused an automatic halt to trading in the bank’s shares on the Swiss market and drove the shares of other European banks into double-digit declines. This sparked new concerns about the health of financial institutions in the aftermath of the collapse of the Silicon Valley Bank in the US and concerns about medium-sized lenders.

Credit Suisse shares fell more than 27% to around 1.6 Swiss francs on Wednesday afternoon on the SIX exchange. This is over 85% less than in February 2021.

The bank robbery conjures up images of “It’s a Wonderful Life” with anxious customers huddled together, desperately pleading with the anguished George Bailey for money.

The collapse of Silicon Valley Bank last week caused panic, but it had several other parallels, instead taking place on Twitter, message boards, cell phones, and bank websites.

What made the collapse of Silicon Valley Bank unique compared to the failure of large banks in the past was how quickly it collapsed. Last Wednesday afternoon, the $200 billion bank announced a plan to raise new capital; on Friday morning it was insolvent and under government control.

At 2am on Monday morning, he shot a video for social media explaining how the crisis in Silicon Valley started, what is being done about it, and to discourage panic.

The US needs “strong legislation” on banking regulation, Senate Majority Leader Chuck Schumer said Wednesday, “hopefully” something bipartisan.

Schumer commented on this in response to a question about whether he would support a bill initiated by Democratic Senator Elizabeth Warren that would restore banking regulation and supervision rolled back under former President Donald Trump.

He declined to say whether he would support the bill, saying he believed in President Joe Biden, Treasury Secretary Janet Yellen and the US Federal Reserve.

New York Senator Kirsten Gillibrand was asked if she had any concerns about Signature Bank being targeted and unfairly let down by regulators for its crypto activities.

She replied no, adding that the bank had “other stability issues”.

A former representative for Barney Frank said on Monday he believed the government officials behind the action were trying to set an example for Signature Bank.

“It was just a way to tell people, ‘We don’t want you to deal with cryptocurrencies,'” Frank told The Associated Press in a telephone interview.

Mr. Frank is a board member of Signature Bank and was one of the pioneers of the landmark Dodd-Frank Act, which was passed after the 2008 financial crisis to better insulate the banking system from shocks.

The New York financial regulator dismissed comments from Frank’s former representative, saying his decision to close Signature Bank “had nothing to do with cryptocurrencies,” citing what it called a “significant crisis of confidence in the bank’s leadership” that occurred over the weekend after regulators they closed Silicon Valley Bank.

But the NYDFS denied his claims in Tuesday’s statement, saying its decision to close Signature Bank on Sunday and appoint the Federal Deposit Insurance Corporation as receiver “was based on the bank’s current status and its ability to conduct business in a safe and sound manner on Monday.”

“The decisions made over the weekend had nothing to do with cryptocurrencies. Signature was a traditional commercial bank with a wide range of activities and clients,” said an NYDFS spokesperson.

“DFS has been facilitating well-regulated crypto activity for several years and is the national model for regulating the space,” they said.

The spokesman added that as withdrawal requests piled up over the weekend, Signature Bank failed to provide reliable and consistent figures.

Mr Frank said he was surprised that the regulator said the decision to close the bank was not related to cryptocurrency.

“I think that was a factor,” he said in an interview. “I wonder why it closed down.”

He added that to his knowledge, bank directors were working to provide the data to regulators.

“We’ve heard from our managers that the escrow situation has stabilized and that they will be raising capital from the discount window, and I still believe that if we had opened on Monday, given the announcement of these two policies, we would be in reasonably good shape and certainly functional,” he said. .

With a Reuters report