Switzerland accelerates liquidity backstop following Credit Suisse disaster. On Thursday, the Swiss government accelerated work to extend a public liquidity backstop Credit Suisse obtained in March under emergency rules to other systemically significant banks and make it permanent.
Over a year ago, the finance ministry was charged with drafting state-guaranteed funds for distressed banks by mid-2023.
In March, Swiss authorities authorized the central bank to give Credit Suisse 200 billion Swiss francs ($225.00 billion) in emergency liquidity.
Credit Suisse received up to 100 billion francs in public liquidity backup loans, drawing 10 billion by April.
The troubled bank had used a 50 billion franc liquidity lifeline.
The government stated that on May 25, it would consult on providing such liquidity backstop to the nation’s five systemically significant banks (SIB).
The Swiss National Bank considers UBS (UBSG.S) and Credit Suisse (CSGN.S) SIBs. Unlisted SIBs include Raiffeisen Group, Zuercher Kantonalbank, and PostFinance.
Because these banks take domestic deposits, lend, and process payments, they needed resilience measures.
“If a SIB gets into distress or fails, this can cause considerable turmoil in the financial system and significant economic damage,” the government said.
It stated the public backstop consultation would be shortened until June 21 owing to urgency. Banks, businesses, and other concerned institutions will be consulted.
The E.U., U.K., and the U.S. have set up emergency liquidity support for systemically important banks.
After Credit Suisse’s takeover, it said a broader regulatory framework assessment was underway.
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