In an effort to avert severe economic implications, the Swiss National Bank (SNB) intervened in Credit Suisse's financial crisis by providing an unprecedented 168 billion Swiss francs ($185 billion) in emergency liquidity. The announcement was made by SNB Chairman Thomas Jordan at the 'SNB and its Watchers event.
The emergency funding, channeled through the ELA+ scheme, was necessitated by substantial outflows from anxious customers and the acquisition of Credit Suisse by UBS. To secure the funds, the SNB utilized preferential rights in bankruptcy proceedings instead of traditional mortgage collateral, ensuring that Credit Suisse could meet its financial obligations and mitigate risks to global financial stability.
Jordan emphasized the importance of banks maintaining adequate collateral for crises and proposed the idea of a state-backed public liquidity backstop. He also suggested a revision of liquidity regulations in light of the rapid pace and volume of customer deposit outflows experienced during this crisis.
Despite this intervention, Jordan warned against ELA+ becoming a regular instrument for the SNB, acknowledging the bank's limitations. He underscored that valuable lessons have been learned from this experience.
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