Credit Suisse's shares soared by 30% on Thursday after it announced it will shore up its finances by borrowing up to £45 billion from the Swiss central bank, bolstering confidence as fears about the banking system moved from the US to Europe.
It was a massive swing from a day earlier when shares of Switzerland's second-largest commercial bank plunged 30% on the SIX stock exchange after its biggest shareholder said it would not put more money into the Swiss lender.
That dragged down other European banks after the collapse of some US banks stirred fears about the health of the global banks.
Credit Suisse, which was beset by problems long before the US bank failures, said on Thursday it would exercise an option to borrow up to £45 billion from the central bank.
"This additional liquidity would support Credit Suisse's core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs," the bank said.
Amid new fears about the health of financial institutions after the recent collapse of Silicon Valley Bank and Signature Bank in the US, Credit Suisse shares at one point lost more than a quarter of their value on Wednesday.
The share price hit a record low after the Saudi National Bank told news outlets that it would not inject more money into the Swiss lender. The Saudi bank is seeking to avoid regulations that kick in with a stake above 10%, having invested £1.3 billion to acquire a holding just under that threshold.
The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and sent shares of other European banks tumbling, some by double digits.
Speaking on Wednesday at a financial conference in the Saudi capital of Riyadh, Credit Suisse chairman Axel Lehmann defended the bank, saying "We already took the medicine" to reduce risks.
Asked if he would rule out government assistance in the future, he said: "That's not a topic. We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that's not a topic whatsoever."
Switzerland's central bank announced late on Wednesday that it was prepared to act, saying it would support Credit Suisse if needed.
A statement from the bank did not specify whether the support would come in the form of cash or loans or other assistance. The regulators said they believed the bank had enough money to meet its obligations.
A day earlier, Credit Suisse reported that managers had identified "material weaknesses" in its internal controls on financial reporting as of the end of last year. That fanned new doubts about the bank's ability to weather the storm.
With concerns about the possibility of more hidden trouble in the banking system, investors were quick to sell bank stocks.
The turbulence came a day ahead of a meeting by the European Central Bank. President Christine Lagarde said last week, before the US failures, that the bank was "very likely" to increase interest rates by a half percentage point to fight against inflation. Markets were watching closely to see if the bank carries through despite the latest turmoil.
Credit Suisse is "a much bigger concern for the global economy" than the midsize US banks that collapsed, said Andrew Kenningham, chief Europe economist for Capital Economics.
It has multiple subsidiaries outside Switzerland and handles trading for hedge funds.
"Credit Suisse is not just a Swiss problem but a global one," he said, but added the bank's "problems were well known so do not come as a complete shock to either investors or policymakers".
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