Credit Suisse Bounces Back After Receiving $54 Billion Lifeline from Swiss Central Bank

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Credit Suisse Bounces Back After Receiving $54 Billion Lifeline from Swiss Central Bank

Credit Suisse, Switzerland’s second-largest bank, saw its shares rebound by more than 30% on Thursday, March 16th, after the announcement that it would borrow up to $53.7 billion from the Swiss central bank. This came after fears of a global banking crisis after the failure of two US regional lenders that has rocked the banking sector. Credit Suisse has already been embroiled in a series of scandals, including acknowledging "material weaknesses" in its internal controls in its annual report. This, along with the failure of US regional lenders, has led to mounting concerns over the bank's viability.

Despite the rebound in Credit Suisse shares, analysts have warned about the bank's financial stability and the impact on the wider sector. Credit Suisse is one of the 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis. The Swiss National Bank has said that capital and liquidity levels at the lender were adequate for a "systemically important bank," but pledged to make liquidity available if needed. Credit Suisse's CEO, Ulrich Koerner, has said that the measures demonstrate "decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders."

This announcement came after a slew of problems for Credit Suisse that have eaten away at its market value. Its asset management branch was rocked by the bankruptcy of British financial firm Greensill, and just a few weeks later, it was hit by the implosion of US fund Archegos, which cost it more than $5 billion. The bank last month booked a net loss of 7.3 billion Swiss francs for the 2022 financial year. As part of a major restructuring plan, Credit Suisse intends to refocus on the wealth management sector.

The banking sector has been under pressure following the failure of two US regional lenders, Silicon Valley Bank and Signature Bank. SVB’s demise was precipitated by the US Federal Reserve’s interest rate-hike campaign, which brought down the value of bonds with lower returns that the California bank held, causing it to lose $1.8 billion. The European Central Bank is also in focus as it is expected to raise rates by a hefty half a percentage point to battle inflation. The Fed will hold its own rate policy meeting next week.

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