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. “Taking this risk would have been irresponsible.”

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. It was done under emergency measure by the executive branch to bypass shareholder approval.

“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 ($109 billion) and that the government is providing another 100 billion francs of support as a backstop if needed.

Jordan said the loans are “not gifts“ but are backed by collateral and subject to interest.

The central bank hiked its key interest rate by half a percentage point to counter inflation that has risen since the beginning of the year, to 3.4% last month. It said more hikes “cannot be ruled out.”

It said that was “above the range the SNB equates with price stability” and that economic growth is expected to be modest this year, forecasting a 1% increase in gross domestic product. The SNB said the global economic outlook was uncertain, with the main risks being an economic downturn and adverse effects of the turmoil in the global financial sector.

It comes as central banks around the world are pressing ahead with their fight against inflation even as banking sector chaos has created a global crisis of confidence in the financial system.

The U.S. Federal Reserve went ahead with a quarter-point rate hike Wednesday, Norway’s central bank did the same Thursday and the Bank of England is expected to approve a increase after inflation unexpectedly grew last month. The European Central Bank raised rates by a half-point last week.

The ECB and Fed chiefs both voiced assurances that the financial system is resilient and that money is safe in banks.

Adrian Prettejohn, a Europe economist at Capital Economics, said the Swiss National Bank “was clearly keen to try to draw a line under the Credit Suisse saga.”

“They seem relaxed about any hit to macroeconomic activity from the Credit Suisse debacle,” he said in a note, pointing to the upgraded forecast for economic growth this year.

Meanwhile, Swiss financial regulators defended how the deal wiped out about 16 billion francs ($17.3 billion) in higher-risk Credit Suisse bonds, which left investors with hefty losses.

Typically, shareholders face losses before those holding bonds if a bank goes under — a hierarchy that the European Central Bank and Bank of England reiterated in statements this week.

The Swiss Financial Market Supervisory Authority, or FINMA, said Thursday that contracts for the higher-risk bonds show that they can be written down in a “viability event,” particularly if the government offers extraordinary support.

That happened under the executive branch’s emergency measures Sunday, which also allowed regulators to order a writedown of the bonds, FINMA said.

Global law firm Quinn Emanuel says it has put together an international team of lawyers from Switzerland, the U.S. and the United Kingdom that is in discussions about possible legal action with bondholders representing “a significant percentage” of the total amount that was issued. The firm convened a call for bondholders Wednesday that drew more than 600 participants.

When it comes to interest rates, the Swiss National Bank has hiked three times over the last six months. A year ago, Switzerland drew international headlines for its unusual policy of maintaining negative interest rates — at negative 0.75%. That policy aimed to help depress a highly valued Swiss franc and meant that some investors actually had to pay interest for the privilege to keep their money in Switzerland, not reap interest from it.

(AP)