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Credit Suisse to take loans of up to $54 billion from the Swiss Central Bank

Credit Suisse, a long-standing Swiss institution, was in dire straits on Wednesday, with its shares hitting a record low and the cost of insuring against a default reaching an all-time high. In an attempt to prevent further damage, the bank has decided to borrow up to $54 billion from the Swiss central bank to improve its liquidity. In addition, Credit Suisse will utilize a “short-term liquidity facility” and repurchase around $3 billion in debt.

The bank’s shares plummeted by 24% on the SIX Swiss Exchange, with its bond prices dropping significantly as well. The cost of financial contracts that insure against a default by Credit Suisse rose to unprecedented levels. However, the Swiss National Bank and Finma released a joint statement after European markets closed, certifying the bank’s financial health and pledging to support it if necessary. Shortly after, Credit Suisse announced its intention to borrow 50 billion Swiss francs from the Swiss National Bank.

The immediate trigger for the sharp decline in the bank’s stock price was a statement by Ammar al-Khudairy, the chairman of the Saudi National Bank and Credit Suisse’s largest shareholder. During a televised interview with Bloomberg News, al-Khudairy announced that the state-owned bank would not be investing any more money into Credit Suisse.

Credit Suisse has been plagued by a series of missteps and controversies over the years, resulting in the departure of two CEOs in just three years. These include significant trading losses linked to the collapses of the investment firm Archegos and the lender Greensill Capital, as well as numerous scandals, including allegations of money laundering and spying on former employees. The bank has implemented a comprehensive turnaround plan, involving thousands of job cuts and the spinoff of its Wall Street investment bank. However, investors are concerned that ongoing losses and client departures, with the bank losing around $147 billion worth of customer deposits in Q4 2022 alone, may jeopardize these efforts.

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