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Document Type

Case Study

Case Series

Ad hoc Emergency Liquidity Programs

Abstract

Credit Suisse (CS) faced multiple challenges leading up to March 2023 including a significant outflow of client funds in the fourth quarter of 2022 and reputational loss resulting from a number of scandals in the preceding years. On Wednesday, March 15, 2023, shortly after two high-profile bank failures in the United States, a high-ranking official of the Saudi National Bank, a major shareholder, publicly said it would not provide any more capital for the company. Despite a joint statement from the Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) that CS was in compliance with capital and regulatory requirements, CS’s share price fell by 24%, and the premiums on the bank’s five-year credit default swaps jumped to more than 1,000 basis points that same day. The following day, on March 16, CS drew 38 billion Swiss francs (CHF) under the SNB’s liquidity facility, the emergency liquidity assistance (ELA) facility, and a further CHF 10 billion from the SNB’s overnight liquidity-shortage financing facility. However, owing to a lack of eligible collateral at CS, the SNB was concerned that these standing facilities would be insufficient. Also on March 16, the government created two new ad hoc emergency liquidity facilities, called ELA+ and the public liquidity backstop (PLB), without making them public. On March 19, 2023, the Swiss government jointly announced the acquisition of CS by UBS and the creation of the two new liquidity facilities, noting that the SNB would make available up to CHF 200 billion to the newly merged bank through the two facilities. CS drew a total of CHF 120 billion under the two programs between March 16 and March 20, in addition to the CHF 48 billion drawn on the standing facilities. CS continued to experience significant outflows of deposits and other client assets in the following weeks. CS had fully repaid the ELA+ and PLB funds by August 2023, and UBS terminated the PLB agreement on August 11, 2023. As of March 22, 2024, CS had CHF 19 billion outstanding under the SNB's standing ELA facility.

Date Revised

2025-04-15

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