Switzerland: The Swiss central bank on Thursday, March 23, raised its benchmark interest rate and asserted that the financial crisis would be resolved by a government-planned acquisition of ailing Credit Suisse by rival bank UBS.
The Swiss National Bank said in a statement that the declaration made on Sunday by the federal government, financial authorities, and the central bank "put a halt to the crisis" and that it is offering substantial support in Swiss francs and other foreign currencies.
The hastily arranged, USD 3.25 billion transaction was intended to calm the financial sector after the failure of two US banks and concerns over Credit Suisse's ongoing issues caused the shares of Switzerland's second-largest bank to plunge and clients to withdraw their money.
After the central bank's plan for Credit Suisse to borrow up to 50 billion francs (USD 54 billion) last week failed to reassure investors and consumers, Swiss authorities urged UBS to acquire its smaller rival.
The Swiss central bank says it will lend the deal up to 100 billion francs, and the government will backstop it if necessary with an additional 100 billion francs.
"An insolvency of Credit Suisse would have had grave ramifications for national and international financial stability as well as for the Swiss economy," said Thomas Jordan, the head of the governing board of the Swiss central bank.
In order to combat the "renewed growth" in inflation that has increased since the year's beginning and reached 3.4% last month, the central bank raised its key interest rate by half a percentage point.
It comes after the US Federal Reserve raised interest rates by a quarter of a percent on Wednesday, and a rise by the Bank of England is anticipated on Thursday. In an effort to reassure the public that the banking system is stable, the European Central Bank and the Federal Reserve both raised interest rates by half a point last week.
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