Seeking To Restore Confidence And Stabilize Liquidity

Credit Suisse has announced that it will borrow up to $100 billion from the Swiss central bank in order to stabilize its liquidity and restore investor confidence. The bank's announcement came in the wake of a slump in its shares, which had intensified concerns about a potential global banking crisis.

  • The move helped to reverse some of the heavy losses in its stock price and restore confidence in the broader financial markets, which had been battered by fears of potential runs on global bank deposits
  • Credit Suisse is the first major global bank to receive emergency funding since the 2008 financial crisis, and its problems have raised doubts about the ability of central banks to sustain their fight against inflation with aggressive interest rate hikes
  • On Sunday, Reuters reported that UBS was nearing the completion of a purchase agreement with Credit Suisse. According to the Financial Times, the deal is worth over $2 billion, following an increase in UBS's initial offer

First Republic Also Gets A Lifeline

On Thursday, a group of major financial institutions, including Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Truist, PNC, U.S. Bancorp, State Street, and Bank of New York Mellon, announced that they will be depositing a total of $30 billion in First Republic.

  • This move is intended to demonstrate confidence in the banking system as a whole and support First Republic's ability to serve its customers and communities
  • The deposits are required to remain at the bank for at least 120 days. First Republic's stock had experienced a significant decline due to concerns about uninsured deposits, but the announcement of the new deposits from the major banks caused the stock to rise nearly 10% to $34.27 per share

In a joint statement, The Federal Reserve, Treasury Department, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency expressed their approval of the show of support from the group of large banks, which they viewed as evidence of the banking system's resilience.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.

Credits

Photo by Daniel Cox on Unsplash.