16 March (Reuters) After a decline in its share price heightened concerns about a global banking crisis, Credit Suisse (CSGN.S) tried to bolster its liquidity and win back investor confidence on Thursday by borrowing up to $54 billion from Switzerland's central bank.
After its announcement on Wednesday night in the middle of the night in Zurich, shares of Credit Suisse momentarily recovered from a 25% loss, but eventually gave up some ground and ended the day 20% higher.
After days of significant losses due to investor concerns over potential bank stresses around the globe, which have also prompted calls for action from businesses in other sectors, Europe's banking index (.SX7P) initially increased but was down 0.3% by 1306 GMT.
Prior to Silicon Valley Bank's (SVB) failure last week, European banks had lost about $165 billion in market value since March 8, according to statistics from Refinitiv.
Since the global financial crisis of 2008, Credit Suisse is the first large bank to receive an emergency lifeline, and its problems have cast significant doubt on the ability of central banks to continue aggressive interest rate increases.
Policymakers have emphasized that because banks are now better capitalized and funds, which almost instantly dried up in 2008, are more readily available, the situation is different from the global financial disaster.
One of the largest financial institutions in Europe, Allianz (ALVG.DE), stated on Thursday that, "unlike what happened during" the 2007–2008 global financial crisis, authorities were "well equipped" to handle any liquidity crisis.
The second-largest bank in Switzerland announced it would use an option to borrow up to 50 billion francs ($54 billion) from the Swiss National Bank, which affirmed it would lend Credit Suisse money in exchange for adequate security.
Following Wednesday's assurances from Swiss authorities that Credit Suisse complied with "the capital and liquidity requirements imposed on systemically important banks," the action was taken.
In a letter to employees, Chief Executive Ulrich Koerner promised to swiftly implement a plan to streamline operations and urged Credit Suisse staff to concentrate on the facts.
Koerner stated that Credit Suisse would keep concentrating on the transformation from a position of strength, noting a better liquidity coverage ratio and recent capital increases.
The bank's stock market value has fallen by 90% since its peak in February 2007 of around $91 billion, to around $8.66 billion following a prolonged slide in its shares.
Analysts said that the measures will buy Credit Suisse time to carry out its planned restructuring, although there could well be further moves to pare down the Swiss lender.