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Credit Suisse gets $54 billion lifeline in bid to ease fears of a global banking crisis

Banking giant Credit Suisse said on Thursday it would borrow $54 billion from Switzerland’s central bank, the latest move by authorities to calm investors and ease growing fears of a global banking crisis.

The move to shore up Switzerland’s second largest commercial bank saw its shares jump as markets in Europe and the United States responded well. It was a remarkable reversal from a day earlier, when Credit Suisse shares tumbled after the collapse of two US banks last week and intensified fears of a possible run on bank deposits.

In a statement published in Zurich in the middle of the night, CEO Ulrich Körner said: “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our customers and other stakeholders.” keep.”

Markets reacted well to the news, with futures in London, Frankfurt and Wall Street rising. Bank stocks soar, with Credit Suisse shares up nearly 23% after an early surge of 30%

However, trading in Asian markets remained volatile.

Sir John Give, a former deputy governor of the Bank of England, told BBC News: “We’ve seen overnight the Swiss central bank saying ‘no, we’re not going to let this go into a disorderly collapse’.”

The deal comes after Credit Suisse led a selloff in bank shares as its share price hit a record high on Wednesday, raising new concerns about the health of global banks following the collapses of Silicon Valley Bank and Signature Bank in the US. Fear has arisen.

Credit Suisse’s long-standing problems worsened when its biggest investor, the Saudi National Bank, said it could not provide more financial support as it was wary of regulatory investigations that would begin.

On Thursday the bank’s chairman Ammar Al Khudairi said the market turmoil in the Swiss lender’s shares was “unwarranted”.

Al Khudairi told CNBC’s Hadley Gamble, “If you look at how the whole banking sector has collapsed, unfortunately, a lot of people were just looking for excuses.” “It’s nervous, a little nervous. I believe this is completely unfair, whether it is for Credit Suisse or for the market as a whole,” he said.

Thursday’s Credit Suisse action is the first to offer such a lifeline to a major international bank since the 2008 financial crisis, and the move could raise questions about how banks will handle rising inflation around the world. Last month, Credit Suisse reported its biggest annual loss since that crisis.

Founded in 1856 and one of the biggest problems in the world, the bank’s problems have shifted the focus of the financial world from America to Europe.

Silicon Valley Bank, the favorite lender to the US tech sector, shut down last week, prompting federal authorities to guarantee all of its deposits. Two days later, New York regulators shut down Signature Bank, a major lender to the cryptocurrency industry.

“The problems at Credit Suisse once again raise the question of whether this is the start of a global crisis or just another ‘silly’ case,” said Andrew Cunningham of Capital Economics, a London-based economic forecaster, in a research note on Wednesday. before the deal was announced.

Political leaders in countries including Australia and South Korea have sought to reassure investors that their banks are well-capitalised and not facing a crisis.

While Credit Suisse’s own issues are separate from the problems plaguing SVB and Signature, analysts say higher interest rates in the US and abroad have put pressure on the value of assets held by lenders around the world.

The Swiss bank, which has struggled with weak profitability in recent years, warned on Tuesday that the recent stream of customer withdrawals has slowed but “has not yet reversed.” This acknowledgment coincides with the disclosure that Credit Suisse had found “material weaknesses” in its financial reporting for 2021 and 2022.

In recent years, the bank has faced one scam after another. It was convicted last summer in connection with a money laundering plot involving a drug ring. And it had quite the entanglement with a collapsed hedge fund and a bankrupt British lender.

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