ZURICH: Credit Suisse rallied on the stock market on Thursday after grabbing a $54 billion central bank lifeline in a bid to restore investor confidence but analysts remain wary about the major lender’s future.

Switzerland’s second-biggest lender suffered its worst-ever day on the stock exchange Wednesday as market fears over the risk of another global banking crisis swirled, after US tech industry lenders Silicon Valley Bank and Signature Bank imploded.

Share prices plunged more than 30 percent to 1.55 Swiss francs, pushing the Swiss National Bank to come to the rescue in a bid to reassure the markets.

Hours before the stock exchange reopened, Credit Suisse announced on Thursday that it would borrow 50 billion francs from the SNB to reinforce the group.

The embattled bank said it was also making buyback offers on about $3 billion worth of debt.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” chief executive Ulrich Koerner said in a statement.

“My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.” The moves seemed to have some effect: at 1200 GMT, Credit Suisse shares were up 22 percent at 2.07 at Swiss francs.

‘Too big to fail’

The Swiss government — yet to say anything on the situation — was set to hold a special meeting on Thursday to discuss Credit Suisse, the national news agency ATS reported.

The SNB loan to Credit Suisse came after the central bank and the Swiss financial regulator FINMA issued a joint statement on the global situation.

“The problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets,” they insisted.

“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks,” they said, referring to the requirements placed on the 30 banks worldwide deemed to be of global importance to the banking system.

These banks, deemed too big to fail, are required to set aside additional cash to withstand shocks in the event of market turbulence.

The regulatory requirements in Switzerland are even higher, given how heavily the banking sector weighs in the wealthy Alpine nation’s economy.

Credit Suisse’s CET1 ratio, which compares a bank’s capital to its risk-weighted assets, stands at 14.1 percent -- slightly less than HSBC but more than that of BNP Paribas, which are among the largest banks in Europe.

Published in Dawn, March 17th, 2023

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