Shares in Credit Suisse plunged to a new record low on Wednesday, even falling as much as 30% after its largest shareholder, Saudi National Bank, ruled out providing more money
By Athena Papakosta
Swiss bank shares Credit Suisse fell to new all-time lows while investors were already on fire because of the collapse of US-based Silicon Valley Bank and also US-based Signature Bank.
Shares in Credit Suisse plunged to a new record low on Wednesday, even falling as much as 30 percent after its largest shareholder, Saudi National Bank, ruled out providing more money for Credit Suisse.
Already on Tuesday, Switzerland’s second largest bank, Credit Suisse, had published its annual report for 2022 identifying “material weaknesses” in the procedures for reporting results for the financial years 2022 and 2021.
The Swiss bank, which in recent years has appeared prone to mistakes that have undermined the confidence of investors and its customers, has promised a recovery plan but the anxiety that has gripped the markets can only be compared to panic.
Credit Suisse stock sank 30% before closing down -24% by late afternoon. Fearing that there are more “buried” problems, investors in the US and Europe began to sell off bank stocks en masse.
In this climate, France’s Societe Generale fell to 12%. France’s BNP Paribas also fell more than 10%, while Germany’s Deutsche Bank fell 8%, as did Britain’s Barclays. At the same time, Europe’s Stoxx 600 fell 2.97% to 436 points, London’s FTSE 100 fell 3.83% to 7,344 points, Frankfurt’s DAX 30 was down 3.27% to 14,735 points and the CAC 40 in Paris it recorded losses of 3.58% at 6,885 units.
At the same time, risk premiums (CDS) were also “on fire” after jumping up to 18 times higher than those of the Swiss bank UBS.
After the heavy losses in the Euromarkets and with concerns about the banks having returned to the fore, Credit Suisse appealed to the Swiss Central Bank to proceed with a public statement of support for the group. Earlier, Credit Suisse chairman Axel Lehman noted that possible government support was “not even on the table”.
Late on Wednesday night it finally became known that Switzerland’s central bank will provide liquidity “if needed” to Credit Suisse in an effort to calm markets worldwide. In a joint statement, financial markets regulator FINMA and the Swiss National Bank said Credit Suisse meets the capital and liquidity requirements applicable to systemic banks” while adding that “there are no indications of an immediate contagion risk for Swiss institutions due to the of current turmoil in the US banking market’.
In the early hours of the morning, Credit Suisse announced it would borrow up to $54 billion from Switzerland’s central bank, the first time since 2008 that such liquidity has been announced to a major global bank since the 2008 banking crisis.
The well-known economist – also known as Dr. Doom- Nouriel Roubini underlining that the Swiss bank is “too big to save and too big to fail”. For his part, the chief economist of Capital Economics, Andrew Cunningham, had emphasized that “Credit Suisse is a bigger concern for the global economy than the medium-sized banks that collapsed in the United States” adding that “Credit Suisse is not a a Swiss problem but a global one”.
Late Wednesday afternoon it became known that the United States Treasury Department is monitoring the situation while the American network Bloomberg reported that the Swiss authorities and Credit Suisse’s management were studying ways to stabilize the bank. Now most eyes are on what the European Central Bank will do today after it is called upon to decide on interest rates.
Credit Suisse was founded in 1856. In recent years it has faced a series of scandals such as money laundering. It lost money in 2021 and money again in 2022, which turned out to be the worst year since the financial crisis of 2008. The Swiss bank had even warned that it does not expect to be profitable before 2024.
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