Swiss bank shares lose more than a quarter of their value in one day, dragging European and US markets down.
Shares in Credit Suisse have plummeted, dragging down other major European lenders as fears of deeper problems in the world banking system have spread in the wake of bank failures in the United States.
Credit Suisse shares lost more than a quarter of their value on Wednesday and hit a record low after the Swiss bank’s largest shareholder, the Saudi National Bank, told news outlets it would stop injecting more money into the bank, which has long been troubled. tormented. before the American banks collapsed.
The unrest caused an automatic suspension of trading in Credit Suisse shares on the Swiss market and sent shares in other European banks plummeting, some by double digits.
That sparked new fears about the health of financial institutions after the recent collapse of Silicon Valley Bank and Signature Bank in the US.
Credit Suisse stock lost about 30 percent of its value, falling to about 1.60 Swiss francs ($1.73) per share, before returning to a loss of 24 percent to 1 in late afternoon trading on the SIX exchange. 70 francs ($1.83). At its lowest point, the price was down more than 85 percent from February 2021.
The Swiss central bank said Wednesday evening that capital and liquidity levels at Credit Suisse were adequate, but stressed that it was ready to make liquidity available to the institution if needed.
“Credit Suisse meets capital and liquidity requirements for systemically important banks. In case of emergency, the SNB will make liquidity available to Credit Suisse,” the Swiss National Bank and Swiss financial regulator Finma said in a joint statement.
Meanwhile, shares on Wall Street fell again as concerns about the strength of banks on both sides of the Atlantic deepened.
The S&P 500 was down 1.8 percent during afternoon trading and the Dow Jones Industrial Average fell 620 points, or 1.9 percent, to 31,539 as of 1:11 p.m. 725 points were down. points. The Nasdaq index was down 1.1 percent.
Oil prices also fell by more than $5 a barrel to their lowest point in more than a year as Swiss bank turmoil shocked global markets and dashed hopes of a recovery in Chinese oil demand.
Speaking at a financial conference in the Saudi capital of Riyadh on Wednesday, Credit Suisse chairman Axel Lehmann defended the bank, saying “we’ve already taken the medicine” to mitigate the risks.
When asked if he would rule out government aid in the future, he said: “That is not a topic. … We are regulated. We have strong capital ratios, a very strong balance sheet. We are all hands on deck, so that is not an issue.”
A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls over financial reporting late last year. That sparked new doubts about the bank’s ability to weather the storm.
The turbulence came a day before a European Central Bank meeting. President Christine Lagarde said last week, before the US bankruptcies, that the bank was “highly likely” to raise its reference rates by half a percentage point to step up its fight against inflation. Markets kept a close eye on whether the bank will persevere despite the latest turmoil.
The US Treasury Department said it is monitoring the Swiss bank crisis and is in contact with global counterparts about it.
According to William Lee, chief economist at the Milken Institute in the US, the Saudi decision points to deeper problems at Credit Suisse.
“The Saudis believe that Credit Suisse has more problems than assumed, and their decision places the emphasis on investors who need to examine the soundness of major international banks,” he told Al Jazeera.