After Credit Suisse (SWX: CSGN) announced plans to borrow up to 50 billion CHF (around $54 billion) from the Swiss central bank in an effort to strengthen its liquidity amid rising fears of the financial crisis spreading to the Zurich-based bank, its stock price skyrocketed 26% on the day.
Indeed, Credit Suisse announced it intended “to exercise its option to borrow from the Swiss National Bank (SNB) up to CHF 50 billion under a Covered Loan Facility as well as a short-term liquidity facility, which are fully collateralized by high quality assets,” according to the bank’s press release on March 16.
As a result of the positive news, the Credit Suisse stock surged over 26% on Thursday, reaching the price of 2.14CHF (around $2.30) per share, reversing the losses of 14% and 23% it accrued during the previous five days and 30 days, respectively, as per the most recent data retrieved by Finbold.
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Banking contagion
The Swiss central bank’s lifeline to Credit Suisse arrives after the collapse of three major banks – Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank – within days of each other increased speculation that more banks, including Pacific Western Bancorp, First Republic Bank (NYSE: FRC), and Western Alliance Bancorporation, could follow as the crisis spread.
Before the loan announcement, Credit Suisse looked like the most likely domino to fall next, particularly as its default insurance cost hit record highs, the Saudi National Bank (SNB) refused to increase its stake, and renowned economist Nouriel Roubini warned that, by some standards, the Swiss banking giant might be too big to be saved.
Meanwhile, investors, fearful of the banking contagion spreading, have started to increasingly purchase cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH), taking them off crypto exchanges en masse over the past several weeks despite the currently hostile regulatory stance toward the crypto industry.
Reportedly, any prospective buyers interested in purchasing Signature Bank must agree to give up all crypto business in order to proceed, as required by the United States Federal Deposit Insurance Corp (FDIC) – although the agency later denied the existence of this requirement, and the bank’s board member Barney Frank believes the takeover was spurred by an anti-crypto motive.
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