Swiss Central Bank Intervenes in Credit Suisse’s Financial Crisis with $185 Billion

In a move to address potential economic fallout, the Swiss National Bank (SNB) stepped in during Credit Suisse’s financial troubles by providing a remarkable 168 billion Swiss francs (approximately $185 billion) in emergency liquidity. This was announced by SNB Chairman Thomas Jordan at the ‘SNB and its Watchers’ event.

The emergency funding, facilitated through the ELA+ program, was prompted by significant withdrawals from worried customers and the acquisition of Credit Suisse by UBS. To secure this funding, the SNB employed preferential rights in bankruptcy proceedings rather than conventional mortgage collateral, ensuring that Credit Suisse could fulfill its financial obligations and reduce risks to global financial stability.

Jordan highlighted the necessity for banks to maintain sufficient collateral during crises and proposed the creation of a state-backed public liquidity backstop. He also recommended revising liquidity regulations in light of the rapid pace and scale of customer deposit withdrawals that took place during this crisis.

However, Jordan cautioned that the ELA+ program should not become a standard tool for the SNB, recognizing the bank’s inherent limitations. He pointed out that important lessons have emerged from this situation.

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