Credit Suisse shares fell more than 20% on the Swiss stock exchange Wednesday, falling for the eighth consecutive session after its top shareholder ruled out more investment and the lender’s short-term debt approached distress levels.
Trading in its shares was suspended late this morning after they fell by a fifth to new lows.
The head of Credit Suisse’s largest investor, the Saudi National Bank, told Reuters that due to a “regulatory issue,” the bank would not buy any more shares. “We cannot because we would exceed 10%… All new rules go into effect, whether they are imposed by our regulator, the Swiss regulator, or the European regulator. We are not included in the new regulatory regime “Ammar Al Khudairy, chairman of the SNB, stated.
The Saudi bank owns 9.88% of Credit Suisse, which it purchased last year, and has committed to investing up to 1.5 billion Swiss francs (US$1.5 billion).
Switzerland’s second-largest bank is attempting to recover from a series of scandals that have eroded investor and client trust. According to a source, customer outflows in the fourth quarter totalled more than 110 billion Swiss francs (US$120 billion).
Al Khudairy, on the other hand, stated that the SNB is pleased with Credit Suisse’s turnaround strategy and stated, “I don’t believe they will require additional funds… Their ratios are fine if you look at them. In addition, they are subject to stringent regulations in Switzerland and other countries.” Al Khudairy stated that the SNB would exit Credit Suisse once “proper value to the shares” had been acquired.
SVB spreads to Credit Suisse and bank stocks?
Concerns about Credit Suisse’s future have been exacerbated by the loss of US-based Silicon Valley Bank and Signature Bank last week; the main indices in Paris and Milan fell by more than 3%, while those in London and Frankfurt fell by less than 2.5%.
Bank stocks fell again across Europe on Wednesday, as regulators and financial executives scrambled to reassure investors concerned about the spread of the SVB crisis.
Nonetheless, concerns about the health of smaller institutions remain, as rapid interest rate rises make it more difficult for some (smaller) businesses to repay or service bank loans, increasing the likelihood of losses for lenders who are also concerned about a recession.
According to Reuters, European Central Bank policymakers are still leaning towards a half-point rate hike on Thursday because they believe inflation will remain too high in the coming years.
In the United States, the focus is shifting to tighter regulations for banks, particularly mid-tier institutions such as SVB and Signature Bank, as President Joe Biden vows to take action against those responsible.
