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Credit Suisse stock jumps on $54 billion loan from Swiss National Bank

Yahoo Finance Live anchors Julie Hyman and Brad Smith discuss the news that Swiss National Bank has provided Credit Suisse with a $54 billion loan.

Video transcript

JULIE HYMAN: Well, Credit Suisse announced that it's going to exercise its option to borrow up to $54 billion from the Swiss National Bank as it tries to regain investor confidence after its stock hit an all-time low yesterday. And in Swiss trading, initially it was working. The stock was surging. You can see it here in US trading now. It's up about 5 and 1/2%. It was up much more than that earlier in Swiss trading as well.

So we're talking about 50 billion Swiss francs now that the Swiss National Bank has made available to Credit Suisse. That's about $54 billion in US dollars. And obviously this is in order to reassure investors about what's going on at Credit Suisse.

Basically now Credit Suisse says it's going to buy back some of its debt. That's one of the things it's going to do to try to cut down on its interest expenses and take advantage of what are now very depressed prices of many of its bonds. So it seems like the crisis there is forestalled for now, effectively just like you had with SVB.

You know, we're going to talk throughout the show about some parallels and some differences between the two banks. One of the parallels is that you have a crisis of confidence--


JULIE HYMAN: --that that's really what is at root here. If you talk to analysts at the bank-- certainly if you talk to executives of the bank, that's what they've been saying. There's nothing fundamentally wrong here is what they are saying, that it's a crisis of confidence.

BRAD SMITH: Yeah, and in what they are saying, even within some of their statements most recently, they are saying that as a global systemically important bank, like its global peers, they're subject to high standards in capital, funding, liquidity, so forth, and leverage requirements as well.

And as of the end of last year, Credit Suisse had a average liquidity coverage ratio of about 144%. You think about the stress testing that every bank on a year in, year out basis has to go through, whether that be conducted in the US here by the Federal Reserve or other international agencies. But that is essentially to ensure that in any event that banks have sufficient capital to absorb more than $600 billion in losses and that they can continue lending to households and businesses under stressful conditions. What more a stressful condition than we find ourselves in right now as many of these banks are trying to prepare for what type of demand they would see for their products, either in loans or even just in cash withdrawals for businesses or households if we were to enter into deeper components of a recession in the near future.

JULIE HYMAN: Yeah, and the Credit Suisse problems are quite specific to Credit Suisse, as we have been laying out. The company's undergone really years of scandals, has had to pay fines for various wrongdoing, has had turnover in its executives as well, and then recently said that it had found material weaknesses in its accounting and, as a result, was going to be delaying the filing of its report. So that is the more immediate stuff that led up to now the stock plunging in recent days-- also after its biggest investor, Saudi investor, said it was not going to be putting more money into Credit Suisse. So that is now where we find ourselves.

Credit Suisse obviously doesn't have a huge presence in the US. However, it does business with banks internationally, including many of those in the US. So that's why there's this concern. If it wasn't able to, say, make good on, you know, any kind of financial relationships it has with other banks, that's where the concern lies.

BRAD SMITH: You talk about the history of scandals, and I was just going down kind of a timeline of what some of those scandals were. I mean, you could almost set your clock on a yearly basis to some of the scandals that had taken place at Credit Suisse, whether it be the 2014 US tax evasion, 2016 Italian tax evasion, 2016 US anti-money-laundering fines as well that they had taken on, European tax evasion in 2017. The list goes on even into the 2019 corporate espionage. That was really the talk of not just Wall Street here in the US but internationally, to your point. And there you're taking a look at some of those timelines of key events that have taken place too.

JULIE HYMAN: So now we have to ask the question of what will happen next, right? It has the ability-- it has this liquidity to tap into the Swiss National Bank.

JPMorgan analyst out with some interesting scenarios this morning. They say we could actually still see a sale of the bank, perhaps to a UBS, possibly followed by a listing or spin off of the Swiss bank, which is worth 10 billion Swiss francs. They said we could see the Swiss National Bank step up with more measures here to take care of it, or the company could close the investment bank.

So these are those scenarios that JPMorgan is laying out as to what could happen next. But like a lot of stuff right now, we don't really know.

BRAD SMITH: No, this is true.