Credit Suisse to take out emergency loan after stock plummets: The story so far
The second largest bank in Switzerland, Credit Suisse, has confirmed that it will be borrowing 50 billion francs from the Swiss National Bank (SNB) in order to shore up its finances. It follows a number of scandals at the firm, which culminated in a dramatic fall in stock price over the last week. Here’s the timeline so far:
Credit Suisse hit by scandal after scandal
Over the last few years, Credit Suisse has been embroiled in a number of scandals that have hurt the firm’s credibility, most notably the Suisse Secrets scandal, business links to failed investment firm Greensill Capital and accusations of money laundering. The bank lost money in 2021 and 2022 and has warned investors and clients that it does not expect to be profitable until 2024.
Last October, Credit Suisse announced that around 9.000 workers would lose their jobs over the next few years and that they would be selling investment assets they deemed too risky in a bid to reverse their fortunes and bring down costs by 15 percent. Last year, Saudi Arabia’s National Bank also confirmed that it would invest billions of francs in order to acquire 9,88 percent of Credit Suisse shares, becoming the company's largest shareholder.
March 14: Credit Suisse report spooks markets
That brings us to the start of this week, when Credit Suisse released its annual report on March 14. In it, the international company confirmed that they had made a loss of 7,3 billion Swiss francs last year. They also confirmed that their CEO group bonus would be halved to 1 billion francs.
What was problematic, according to Swissinfo, was that the report itself was heavily delayed, after the United States Securities and Exchange Commission said that the bank wasn’t able to answer key questions relating to certain figures. The delay, combined with Credit Suisse admitting that its “internal control over financial reporting was not effective” at spotting errors in its financial statements, spooked the market and caused Credit Suisse’s stock price to fall.
March 15: Saudi Arabian investor
Then, on March 15, the largest shareholder of Credit Suisse, the Saudi Arabian National Bank, announced that it would not be providing any more financial assistance to the firm. While, according to Swissinfo, authorities in the Gulf state cited “regulatory issues” for the change, and said that they "are happy with the plan, the transformation plan that they have put forward. It is a very strong bank," the comments caused the stock price to fall further.
On the eve of the announcement, Credit Suisse’s share price dropped below 2 Swiss francs. At one point, CS stock had dropped by 30 percent on March 15, before settling at a still eye-watering loss of 25 percent. The sell-off also put the authorities on high alert, with the US Treasury, the French government and European Central Bank all confirming that they were monitoring the situation closely.
March 16: Credit Suisse takes out emergency loan
Finally, after a call from the bank for stability, Swissinfo reported on March 16 that Credit Suisse will be borrowing 50 billion francs from the Swiss National Bank (SNB) - the equivalent of Switzerland’s central bank. “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,” a spokesperson told the national media.
The SNB and the Swiss Financial Market Supervisory Authority (FINMA) said that the government was ready to provide the bank with “emergency liquidity.” Swissinfo predicted that the reason for the loan is to placate investor fears and make sure clients don’t rush to take money out of the bank.
Credit Suisse stock begins to stabilise
The announcement of government intervention appears to have calmed investors, as CS share rose by 20 percent when the stock market reopened on March 16. Swissinfo made the point that many in Switzerland see the bank as “too big to fail” with FINMA stating that Credit Suisse "meets the higher capital and liquidity requirements applicable to systemically important banks” - i.e. they are satisfied that the bank has enough money to continue running.
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