Credit Suisse intends to borrow the equivalent of about $54 billion from the Central Bank of Switzerland.
The ailing bank said it had decided to take “decisive measures” proactively to boost its cash flow.
Swiss regulators said they were ready to support the bank “if necessary”, in light of fears of a broader crisis as a result of the collapse of the US bank Silicon Valley.
Credit Suisse shares fell by a record 24 percent.
The bank’s troubled situation raises investors’ concern, in addition to their apprehension, which began with the bankruptcy of the American bank.
Concerns reached the stock markets, which recorded a sharp decline in all major indices.
Calm fears
The Swiss central bank, along with the financial markets supervisor, sought to allay concerns.
The two parties issued a joint statement stating: “There are no indications of a direct risk of transmission of the US banking market turmoil to Swiss institutions.”
The statement noted that strict rules apply to Swiss financial institutions “to ensure their stability” and that Credit Suisse “meets the requirements of banks considered to be of systemic importance”.
He added that “if necessary, the central bank will provide liquidity” to Credit Suisse.
The fears had put pressure on stocks all over the world, and the Stoxx Europe banking stock index recorded a decline of 7 percent.
The FTSE 100 index in Britain fell by 3.8 percent, recording the largest one-day decline since the early days of the Corona pandemic in 2020.
The German DAX index also recorded a decline of more than 3 percent, and the French CAC index closed down by about 3.5 percent. The Spanish IBEX index fell more than 4 percent.
The shares of small and large banks in the United States were affected, which contributed to the Dow index falling by 0.9 percent, while the “Standards & Poor’s 500” index fell by 7 percent.
A new global crisis
“Credit Suisse’s troubles have once again raised questions about whether this is the beginning of a new global crisis or just another special case,” Andrew Cunningham of the research firm Capital Economics wrote.
The turmoil in the US banking sector began last week with the collapse of Silicon Valley Bank, ranked 16th among the largest banks in the United States.
The bank, which specializes in lending to technology companies, was closed on Friday by order of the US regulator, in a process described as the largest bankruptcy of a US bank since 2008.
After the bankruptcy of the Silicon Valley bank, it was the turn of Signature Bank in New York to close its doors as well. The US regulator has guaranteed all deposits in the two banks.
However, fears of the bankruptcy of other banks persisted, which led to fluctuations in trading in bank stocks during the week.
The CEO of investment giant BlackRock wrote in an annual letter to investors that it was still “too early to know the extent of the damage”.
The Swiss “Credit Suisse” bank, which was founded in 1856, has faced a series of scandals in recent years, including accusations of money laundering and other issues.
The bank lost money in 2021 and 2022, which witnessed its worst banking crisis since 2008, and it received warnings that it might not make profits before 2024.
Credit Suisse shares took a hit earlier this week – with their value dropping by about two-thirds last year – as a result of customers withdrawing funds, including 110 billion Swiss francs ($120 billion), in the last three months of 2022.
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Credit Suisse shares hit a record low
Credit Suisse stressed that its financial situation was not a cause for concern, and its chief executive said that cash reserves “remain very strong”.
However, shares in the bank closed down by 24 percent, while other banks rushed to reduce their dealings with it.
Bloomberg quoted BNP Paribas that it had stopped accepting some agreements if Credit Suisse was a party to them.
“This banking crisis came from the United States, and now the world is watching how it will cause problems also in Europe,” said Robert Halver, director of capital markets at the German “Baader” Bank.
Declines in stocks indicate that many banks may be exposed to potentially large losses.
