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GENEVA (AP) — The SNB will lend up to 50 billion francs ($54 billion) to banks to boost confidence in the country’s second-largest bank and ease concerns about the post-collapse international financial system Credit Suisse shares soared on Thursday after agreeing to do so.of his two banks in the United States.
Credit Suisse announced the deal before the opening of the Swiss stock market, sending the share price up 33% to CHF2.13 before settling in a 25% gain in intraday trading. This was a big turnaround from the day before, when news that the bank’s largest shareholder wouldn’t put additional money into Credit Suisse sent its share price down by 30% to his and other European banks..
European bank stocks also edged higher on Thursday.
The Swiss National Bank said Wednesday that it stands ready to help Credit Suisse as it meets higher capital and liquidity requirements for “systemically important banks”. It poses no “direct risk of contagion” to Switzerland.
In short, it’s an effort to build trust.
“Regulators must expect this to be enough in Switzerland,” said Russ Mold, investment director at online investment platform AJ Bell. “They don’t want you to be someone who sits in a dark room or a dark movie theater and screams fire because that’s what makes you rush out.”
“What they are trying to do is tell depositors, ‘Your money is safe. Told. “They’re trying to say move on. I can’t see anything here.”
Credit Suisse in trouble A loan from the central bank would give it time to complete a restructuring to create a “simpler, more focused bank,” long before the collapse of the U.S. bank, he said Thursday.
“These measures represent a decisive move to strengthen Credit Suisse and to deliver value to our customers and other stakeholders,” said CEO Ulrich Körner in a statement. continues its strategic transformation.
Despite bank turmoil, the European Central Bank It hiked interest rates by 0.5% to combat stubbornly high inflation, said the European banking sector was “resilient” and public finances sound.
Higher Interest Rates Fight Inflation More recently, however, concerns have grown that it may have caused hidden losses on bank balance sheets.
US and European central banks acted swiftly to restore confidence in the banking system It was the second-largest bank failure in U.S. history, following last week’s failure of the Silicon Valley Bank.
On Sunday, U.S. officials said they would insure all deposits at California-based Silicon Valley Bank and smaller New York signatory banks to ensure people aren’t hurt by the bank’s collapse.U.S. Federal Reserve It also announced additional funding to enable other banks to meet depositor needs.
The British government and the Bank of England announced Monday that they have facilitated the sale of Silicon Valley Bank’s UK division to HSBC, one of Europe’s largest banks, to give the bank’s customers access to funds.
John Gieve, former deputy governor of the Bank of England, said the swift response was unlike what happened at the start of the global financial crisis 15 years ago.・Forgive Brothers bankruptcy.
“It upset the whole market because they didn’t support it,” Gieve told the BBC. “So what we saw overnight is that the SNB is saying, ‘No, we won’t let this fall into chaotic collapse.
“I don’t know what the future holds for Credit Suisse, but for now we are still standing,” he added. “And the SNB seems to guarantee that it will survive long enough to reorganize its operations for the future.”
banks are under pressure After a prolonged period of historically low interest rates followed by a rapid rise in interest rates.
To increase the return on investment, banks need to take on more risk, and some have “done this more carefully than others,” said the Frankfurt School of Finance and Sascha Steffen, Professor of Finance in Management, said:
As a result, some banks are now facing a shortage of ‘liquidity’. This means that assets cannot be sold fast enough to meet depositor demand.
Credit Suisse shares hit a record Wednesday after the Saudi National Bank said it would not inject additional money into Swiss banks to avoid restrictions that would apply if an investor held more than 10%. dropped to an all-time low.
Credit Suisse also reported Tuesday that as of late last year, managers had identified “significant weaknesses” in internal controls over the bank’s financial reporting. has occurred.
The stock has been in a long-term decline, currently trading at just over 2 francs, but was above 80 francs ($86.71) in 2007.
Swiss banks have pushed to develop new strategies to raise money from investors and overcome a range of problems, including bad bets on hedge fundsrepeated dismissal of top management and spy scandal Zurich rival UBS involved.
Andrew Kenningham, chief European economist at Capital Economics, said Credit Suisse was “a much bigger concern for the global economy” than the bankrupt midsize US bank.
It has several subsidiaries outside Switzerland and handles hedge fund transactions.
The issue “renews the question of whether this is the beginning of a global crisis, or simply another ‘peculiar’ incident,” Kenningham said in a note. It was widely regarded as the weakest link among banks, but it’s not the only bank that has struggled with poor profitability in recent years.”
European finance ministers said this week that their banking systems would not be directly exposed to U.S. bank failures.
After the global financial crisis that followed the collapse of US investment bank Lehman Brothers in 2008, Europe stepped up banking safeguards by transferring oversight of its largest banks to central banks, analysts say.
Credit Suisse’s parent bank is not subject to EU supervision, but has entities in several European countries. As one of the so-called 30 Global Systemically Important Banks (G-SIBs), Credit Suisse is subject to international rules that require it to maintain financial buffers against losses.
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Kirka reported from London. He from Frankfurt, Germany contributed to AP reporter David McHugh, Colleen Barry from Milan and Joseph Krauss from Ottawa, Ontario.
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