Global banking concerns shift from US to Europe amid Credit Suisse bailout

ECONOMY – Swiss bank Credit Suisse said it would borrow up to 50 billion francs from the Swiss central bank to shore up liquidity and boost investor confidence, as the collapse of two banks in the United States last week raises concerns about the health of global banks in the face of rising interest rates.

A building of the Credit Suisse bank in Zurich, Switzerland. The bank on Thursday announced it has been offered a 50 billion franc loan from the Swiss central bank to stave off investor fears of its ability to continue to do business. © Ennio Leanza/AP

In a statement on Thursday, Credit Suisse said it would exercise an option to borrow 50 billion francs (57 billion euros) from the central bank, following assurances from authorities that the bank met "the capital and liquidity requirements imposed on systemically important banks" and that it could access central bank liquidity if needed.

The initial reception from markets of news of the lifeline was positive, offsetting losses that stripped the bank of a quarter of its market value in heavy selling in financial markets in Asia the day before.

First lifeline since 2008

The 167-year-old Credit Suisse, which has multiple subsidiaries outside Switzerland and handles trading for hedge funds, is the first major global bank to be thrown an emergency lifeline since the 2008 financial crisis.

Its troubles have raised serious doubts over whether central banks will be able to sustain their fight against inflation with aggressive interest rate hikes.

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The rapid rise of interest rates around the world have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders already worried about a recession.

JP Morgan analysts said the loan would not do enough to sooth investors’ concerns, and it would instead give Credit Suisse time to carry out its restructuring. A takeover was a likely outcome, they added.

The concerns about Credit Suisse are adding to a broader concern in the banking sector sparked by the collapse last week of two US lenders, Silicon Valley bank and Signature Bank.

 (with wires)