Chancellor ‘welcomes’ decision to give Credit Suisse £44.5bn lifeline as shares bounce back
Chancellor Jeremy Hunt has “welcomed” the Swiss central bank’s decision to give Credit Suisse a lifeline of 50bn Swiss francs (£44.5bn).
The bank said it was “taking decisive action to pre-emptively strengthen its liquidity” with the central bank loan after shares plunged about 30% – intensifying fears of a global financial crisis.
The shares rose slightly at the close of trading on the SIX stock exchange – representing a 24% slide.
But news of the lifeline sparked a positive response from the markets, with shares surging by as much as 32% in the first few minutes of trade on Thursday.
They were last up 18.4%.
On Thursday morning, the day after he delivered his spring budget, Mr Hunt told Sky News the developments in Switzerland were “encouraging”.
During a separate radio interview, he said chancellors “never comment on movements in markets for very obvious reasons” but added: “All I will say is of course I monitor what is going on in the markets, the Bank of England governor monitors carefully what is going on; he keeps me informed.
“I think the news we have heard from the Swiss authorities overnight is welcome.”
Credit Suisse said in a statement that the additional funding would support its core business and clients as it takes the “necessary steps to create a simpler and more focused bank built around client needs”.
It came after the Swiss National Bank and the Swiss financial markets regulator pledged emergency funding would be available if it was needed.
The central bank issued an assurance that Credit Suisse met “the capital and liquidity requirements imposed on systemically important banks”.
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Shares fall by up to 30%
Credit Suisse rattled markets on Wednesday by announcing it had found “material weaknesses” in its financial reporting processes for 2021 and 2022.
Its market value fell by up to 30% after the biggest shareholder, Saudi National Bank, said it would not provide any further financial assistance because rules prevent it from raising its equity stake above 10%, close to where it currently sits.
It prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and tanked shares of other European banks – some by double digits.
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The FTSE lost £75bn in combined market value by the close on Wednesday after suffering its deepest fall on a points basis since the early days of the COVID crisis.
Speaking at a financial conference in the Saudi capital of Riyadh on Wednesday, Credit Suisse chairman Axel Lehmann defended the bank, saying “we already took the medicine” to reduce risks.
When asked if he would rule out government assistance in the future, he replied: “That’s not a topic… We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that’s not a topic whatsoever.”
Credit Suisse has faced several crises in recent years, from a corporate spying scandal, losses related to the collapse of a supply chain finance group Greensill Capital, and the collapse of hedge fund management company Archegos Capital.
In an annual report on Tuesday, the bank said customer deposits fell 41% (159.6bn Swiss francs or £142bn) at the end of last year compared to the year before.
The turmoil has added to concerns about the broader banking sector after Silicon Valley Bank and Signature Bank, two US mid-size firms, collapsed last week.
