Problems at Switzerland’s second-biggest lender are causing stocks around the world to falter—and reigniting fears for the banking sector.
‘s top shareholder said in a Bloomberg interview that it wouldn’t invest additional money in the Swiss bank. Saudi National Bank Chairman Ammar Al Khudairy told the media outlet that taking a stake of more than 10% in Credit Suisse would trigger regulatory complications.
That pushed shares of Credit Suisse to a new low on Wednesday. The stock (ticker: CSGN.Switzerland) closed down 24% in Zurich and its American depositary receipts (CS) were down 25% in U.S. trading.
Credit Suisse has asked the
Swiss National Bank
the country’s central bank, and its financial regulator, Finma, to make a statement reassuring investors about its financial health, the Financial Times reported, citing unidentified people familiar with the talks. Credit Suisse and the Swiss National Bank declined to comment on the report.
The U.S. Treasury Department is actively reviewing the U.S. financial sector’s exposure to Credit Suisse, according to a Bloomberg report. The Treasury Department didn’t respond to a request for comment
After Silicon Valley Bank’s collapse, the banking sector is on high alert. European banks such as France’s
(GLE. France) and Italy’s
(UCG. Italy) were down double-digits Wednesday.
(UBSG.Switzerland) fell nearly 8.7%.
Shares of U.S. lenders
(WFC) also fell on Wednesday.
Shares of the regional banks put on downgrade watch by ratings agency Moody’s on Tuesday were mixed.
Western Alliance Bankcorp
(CMA) stock were down earlier, but have since turned higher. Shares of
First Republic Bank
(FRC) have fallen 17%.
Renewed fears of contagion hit the broader market too. The
was off 2% and the
Dow Jones Industrial Average
was down more than 700 points, or 2.2%. At one point, the S&P 500 fell into negative territory for the year. The pan-European
STOXX Europe 600 index
was down nearly 3% with all but 45 components in the red.
“The banking rout has taken on another ominous twist,” said Susannah Streeter, head of money markets at Hargreaves Lansdown. “The worry is that banks sitting on large unrealized losses in their bond portfolios might not have sufficient buffers if there is a fast withdrawal of deposits.”
Investors are watching coming policy decisions at central banks, which—in some cases—have raised interest rates aggressivly over the past year. The European Central Bank, set to meet Thursday, will be the first central bank to meet since SVB’s meltdown. The Federal Reserve meets on March 22.
European Central Bank President Christine Lagarde said a month ago that the ECB intends to increase rates by another half point in March. Odds that the Fed will not raise rates at the March meeting have increased to nearly 60% Wednesday, according to the CME FedWatch.
Why Is Credit Suisse Struggling? A Recap of Recent Troubles.
Credit Suisse’s struggles extend beyond today’s news.
The stock fell on Tuesday after it released a delayed annual report that described weaknesses in the firm’s financial controls. The report had been delayed after the Securities and Exchange Commission raised questions about its cash flow statements in 2019 and 2020.
Last week, asset manager Harris Associates, Credit Suisse’s largest shareholder, completely exited its position in the bank, according to a Financial Times report. Credit Suisse declined to comment on the report.
This is the latest in a series of issues for the bank. The 170-year-old Swiss bank was hit hard by losses from the collapse of Archegos Capital and Greensill Capital in 2021. The bank has posted a loss for five straight quarters and is in the middle of its second major overhaul in as many years after a series of scandals, executive changes, and client withdrawals.
In November, Credit Suisse announced plans to spin out its investment bank under its revived First Boston brand. It also slashed 9,000 jobs.
Credit Suisse is now focusing on rebuilding its wealth management business. That unit experienced about $100 billion of outflows in the fourth quarter. Other than the Saudi National Bank, Credit Suisse’s biggest shareholders include Qatar Holding, Olayan Group, and
Shares of the bank are down 75% over the past year.
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