Shares in Credit Suisse plunged and triggered declines in other major European banks, amid growing concerns about deeper problems in the world banking system following bank failures in the United States.
Shares in Credit Suisse fell by more than a quarter to hit an all-time low on the 15th of this month after the bank’s largest shareholder, the National Bank of Saudi Arabia, told news outlets that it would not inject more money into the bank, which had already Even before Bank of America collapsed, it was plagued by some longstanding problems.
The turmoil led to an automatic suspension of trading in Credit Suisse shares on the Swiss market and sent shares of other European banks tumbling, some by double digits.
These collapses have fueled further concerns about the health of financial institutions following the recent collapse of Silicon Valley Bank and Signature Bank.
Shares in Credit Suisse fell nearly 30 percent to about 1.60 Swiss francs ($1.73) each before recovering a 24 percent loss in late afternoon trading on Switzerland’s SIX stock exchange to 1.70 Swiss francs (about $1.83). And its lowest share price has fallen by more than 85% since February 2021.
The Swiss National Bank (Swiss National Bank) said on the evening of the 15th that Credit Suisse’s capital and liquidity levels are still sufficient, but stressed that it will provide liquidity to the institution when needed.
“Credit Suisse meets the capital and liquidity requirements for systemically important banks. The Swiss National Bank will provide liquidity if needed,” the Swiss National Bank and the Swiss financial regulator said in a joint statement.
Meanwhile, Wall Street stocks fell again amid heightened concerns about the strength of shores on both sides of the Atlantic.
The S&P 500 was down 1.8% in afternoon trading. As of 1:11 pm New York time, the Dow Jones Industrial Average fell 620 points, or 1.9%, to 31,539 points, after falling as much as 725 points at one point. Separately, the Nasdaq Composite also fell 1.1%.
Oil prices also fell – dropping more than $5 a barrel to their lowest level in more than a year, as temporary jitters at Credit Suisse offset optimism in world markets about a recovery in Chinese oil demand.
In a financial conference held in the Saudi capital Riyadh on the 15th of this month, the Chairman of Credit Suisse Axel Lehmann defended the bank, saying, “We have taken steps” to reduce risks.
Asked if he could rule out receiving government aid in the future, he said, “It can’t be a problem. We’re regulated. We have strong capital ratios, we have strong balance sheets. We’re all in this, so this is not a negotiable question.”
A day earlier, Credit Suisse said that by the end of last year, management had found “significant deficiencies” in the bank’s internal controls over financial reporting. And that raised further questions about the bank’s ability to weather the storm.
The turmoil comes a day before the European Central Bank meets. Ahead of the US bank collapse, European Central Bank President Christine Lagarde said last week that the ECB would “likely” raise its benchmark interest rate by half a percentage point to continue its drive to fight inflation. Now, the market is watching closely whether the bank can continue to implement this measure amid the recent turmoil.
The US Treasury Department said it is paying attention to the crisis faced by Credit Suisse and is in contact with relevant global organizations on this incident.
William Lee, chief economist at the Milken Institute in the United States, said the Saudi decision showed Credit Suisse was facing deeper problems.
“The Saudis believe Credit Suisse could be in more trouble than imagined, and their decision underlines the need for investors to look into the soundness of major global banks,” he told Al Jazeera.