Credit Suisse shares surge 32%, European markets open higher after Swiss central bank steps in

Swiss banking major Credit Suisse's shares surged 32 per cent at the start of trading in Zurich, after the embattled bank announced that it will borrow up to $54 billion (50 billion Swiss francs) to boost its liquidity amid the current crisis. Credit Suisse's shares had nosedived by 30 per cent on Wednesday. 

In a statement, the bank said that the additional liquidity would support Credit Suisse's core business and clients as the bank takes the necessary steps to create a simpler and more focused bank built. 

Credit Suisse said the borrowing will be made under the covered loan facility and a short-term liquidity facility, and it will be fully collateralised by high-quality assets. The bank also announced offers for senior debt securities for cash of up to 3 billion francs. 

The UK’s FTSE 100 index has opened higher – up 66 points, or 0.9 per cent, to 7411 points – reversing a little of the 3.8 per cent fall yesterday. 

Elsewhere, European stock markets are expected to open firmly higher on Thursday following the news. At 03:00 ET (07:00 GMT), the DAX futures contract in Germany traded 1.4 per cent higher, CAC 40 futures in France climbed 0.4 per cent, while the FTSE 100 futures contract in the U.K. rose 1 per cent. 

Banking stocks are the top risers on the European stock markets in early trading 

Credit Suisse is the first major global bank to be given such a lifeline since the 2008 financial crisis. Central banks have extended liquidity more generally to banks during times of market stress including the coronavirus pandemic.

SVP's sudden collapse last week, followed by that of Signature Bank two days later, sent global bank stocks on a roller-coaster ride this week, with investors discounting assurances from US President Joe Biden and emergency steps giving banks access to more funding.

Today’s other highlight will be European Central Bank’s latest monetary policy decision later in the day. The central bank is expected to announce a 50 basis point rate hike, as signaled by ECB President Christine Lagarde last month, as inflation remains elevated.

Credit Suisse crisis

The shares of Credit Suisse crashed on Wednesday after its main shareholder Saudi National Bank said that it would not invest any more money in the Swiss bank.

Besides on Tuesday, Credit Suisse released its delayed annual report in which it identified "material weaknesses" in its internal controls over financial reporting and said it had not yet stemmed customer outflows.

"As of December 31, 2022, the Group’s internal control over financial reporting was not effective, and for the same reasons, management has reassessed and has reached the same conclusion regarding December 31, 2021," it said.

On Thursday in an email to Business Today, the bank clarified that: "Credit Suisse would like to reiterate, as announced this morning, our financial results for 2022 and preceding years are accurate and reliable, as supported by a clean audit opinion by our external auditor, PwC. Disclosures regarding the financial reporting control environment in the 2022 Annual Report have no impact on the full-year financial results that were announced on February 9, 2023, and none of the key metrics are affected."

(With agency inputs)