Credit Suisse deal halted crisis, Swiss central bank says

GENEVA (AP) — The Swiss central bank hiked its key interest rate Thursday and insisted that a

government-orchestrated takeover of troubled Credit Suisse

by rival bank UBS ended the financial turmoil.

In a statement, the Swiss National Bank said it is providing large amounts of support for the deal to merge Switzerland's biggest banks and that the late Sunday announcement by the federal government, financial regulators and the central bank “put a halt to the crisis.”

“An insolvency of Credit Suisse would have had severe consequences for national and international financial stability and for the Swiss economy,” said Thomas Jordan, chairman of the Swiss central bank’s governing board.

The

hastily arranged, $3.25 billion deal

aimed to stem the upheaval in the global financial system after the

collapse of two U.S. banks

and jitters about long-running troubles at Credit Suisse

led shares of Switzerland's second-largest bank to tank

and customers to pull out their money.

Swiss authorities urged UBS to take over its smaller rival after the central bank's plan for

Credit Suisse to borrow up to 50 billion francs

($54 billion) last week

failed to reassure investors and customers

.

“The extensive liquidity assistance provided the time needed to find a solution to safeguard financial stability,” the central bank said in a statement. “This solution had to be worked out under considerable time pressure in order to be ready before the Asian markets opened this week.”

To support the deal announced late Sunday, the Swiss central bank has said it is providing a loan of up to 100 billion francs and that the government is providing another 100 billion francs of support as a backstop if needed.

The central bank hiked its key interest rate by half a percentage point to counter “renewed increase” in inflation, which has risen since the beginning of the year, to 3.4% last month.

It follows a

quarter-point rate hike by the U.S. Federal Reserve

on Wednesday and expectations of a rise by the

Bank of England

on Thursday. The

European Central Bank hiked by a half-point

last week, with the ECB and Fed chiefs voicing assurances that the financial system is stable.

___

McHugh reported from Frankfurt, Germany.