Chancellor Jeremy Hunt has “welcomed” the Swiss central bank’s decision to give Credit Suisse a 50 billion Swiss franc (£44.5 billion) lifeline.
The bank said it was “taking decisive action to preemptively bolster its liquidity” with the central bank loan after shares plunged around 30% to a value of around 1.6 Swiss francs. (£1.42) – intensifying fears of a global financial crisis.
The value of the shares rose to 1.7 Swiss francs (£1.51) at the close of the SIX exchange, representing a loss of 24%.
On Thursday morning, the day after the delivery of his spring budgetMr Hunt told Sky News the developments in Switzerland were “encouraging”.
In a radio interview, he said Chancellors ‘never comment on market movements for very obvious reasons’, but added: ‘All I will say is of course I’m watching this what is happening in the markets, the Governor of the Bank of England is watching what is happening carefully and keeping me informed.
“I think the news we heard from the Swiss authorities overnight is welcome.”
Credit Suisse said in a statement that the additional funding would support its core business and its customers as it takes the “necessary steps to create a simpler, more focused bank built around customer needs.”
It came after the Swiss National Bank and the Swiss financial markets regulator promised emergency funding would be available if needed.
The central bank issued an assurance that Credit Suisse met “the capital and liquidity requirements imposed on systemically important banks”.
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Stocks fall as much as 30%
Credit Suisse shook markets on Wednesday by announcing that it had found “significant weaknesses” in its financial reporting processes for 2021 and 2022.
Its market value plummeted by as much as 30% after top shareholder Saudi National Bank said it would not provide any further financial aid as rules prevent it from increasing its stake above 10%, near its current position.
This caused an automatic pause in trading of Credit Suisse shares in the Swiss market and sent the shares of other European banks down – some by double digits.
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Concerns about the banking sector
The FTSE lost £75bn in combined market value at Wednesday’s close after suffering its biggest drop in points since the early days of the covid crisis.
Speaking at a financial conference in the Saudi capital of Riyadh on Wednesday, Credit Suisse Chairman Axel Lehmann defended the bank, saying “we’ve already taken the medicine” to reduce risk.
When asked if he would rule out government assistance in the future, he replied: “It’s not a topic… We are regulated. We have strong capital ratios, a very strong balance sheet We’re all on deck so it’s not a topic whatsoever.”
Swiss credit has faced several crises in recent years, from a corporate espionage scandal, losses related to the collapse of supply chain finance group Greensill Capital and the collapse of hedge fund management firm Archegos Capital.
In an annual report released on Tuesday, the bank said customer deposits had fallen by 41% (159.6 billion Swiss francs or £142 billion) at the end of last year compared to the year former.
The unrest added to concerns about the wider banking sector after Bank of Silicon Valley and Signature Bank, two midsize US companies, collapsed last week.
