Credit Suisse Group AG said it would borrow up to 50 billion Swiss Francs or around $53.7 billion from the Swiss National Bank after the Swiss banking major lost much of its value in the wake of latest banking industry turmoil. The development comes as its largest investor Saudi National Bank said that it could not provide the Swiss bank with more financial assistance.
Shares of Credit Suisse fell as much as 30 percent on Wedneday, and closed the day’s trading at 1.70 francs, down 24.24 percent. Shares also fell 14 percent on the NYSE trading, while it ganed back around 6 percent in the extended trading.
Credit Suisse shares started to lose after the bank admitted earlier this week that it had identified “material weaknesses” in its financial reporting for the years 2022 and 2021.
Since last Friday, the global banking industry has been facing scrutiny following the failure of U.S banks Silicon Valley Bank and Signature Bank, deemed as the biggest U.S. banking failures since the 2008 financial crisis.
In a statement, Credit Suisse said it intends to exercise its option to borrow money from the Swiss National Bank or SNB as a decisive action taken to pre-emptively strengthen its liquidity.
The company would access the SNB’s Covered Loan Facility as well as a short-term liquidity facility of up to approximately 50 billion francs in aggregate. The additional liquidity is expected to support Credit Suisse’s core businesses and clients as part of its efforts to create a simpler and more focused bank built around client needs.
Credit Suisse also announced offers by Credit Suisse International to repurchase certain OpCo senior debt securities for cash of up to around 3 billion francs.
In addition, the bank is making a cash tender offer in relation to ten US dollar denominated senior debt securities for an aggregate consideration of up to $2.5 billion. A separate cash tender offer in relation to four Euro denominated senior debt securities for up to 500 million euros has also been announced.
The offers will expire on March 22, subject to the terms and conditions.
CEO Ulrich Koerner said, “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders. We thank the SNB and FINMA as we execute our strategic transformation.”
SNB and the Swiss Financial Market Supervisory Authority FINMA jointly said Wednesday that Credit Suisse meets the higher capital and liquidity requirements imposed on systemically important banks, and that the current turmoil in the US banking market do not pose a direct risk of contagion for the Swiss financial markets. If necessary, the SNB would provide CS with liquidity, they said.
Meanwhile, regarding further assistance to Credit Suisse, Saudi National Bank chairman Ammar Al Khudairy said that it cannot as the stake would go above 10%, and its a regulatory issue. The Saudi bank had acquired a stake of almost 10% last year.
In its annual report 2022 released on Tuesday, the Swiss lender said its internal control over financial reporting as of December 31, 2022 and 2021 was not effective. The disclosure controls and procedures were also not effective, it said.
Credit Suisse, which initially scheduled to release its 2022 annual report last Thursday, delayed the publication following a late call from the U.S. Securities and Exchange Commission or SEC.
Credit Suisse disclosed that in 2022 it experienced significantly higher withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows.
According to the bank, these outflows stabilized to much lower levels but had not yet reversed. These outflows led the firm to partially utilize liquidity buffers at the Group and legal entity level, and it fell below certain legal entity-level regulatory requirements.
Silicon Valley Bank had a dramatic collapse on last Friday after many clients withdrew their money, expecting that bank may fail in the near future. Further, Signature Bank was closed by the U.S. regulators following a significant deposit outflows related to contagion from Silicon Valley Bank’s failure, among others.
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