Bank fears spread to Europe, drag down shares of big lenders

GENEVA (AP) -- Fears about the world banking system spread to Europe on Wednesday as shares in the globally connected Swiss bank Credit Suisse plunged and dragged down other major European lenders in the wake of bank failures in the United States.

Grey clouds cover the sky over a building of the Credit Suisse bank in Zurich, Switzerland, on Feb. 21, 2022. File Photo Keystone via AP

At one point, Credit Suisse shares lost more than a quarter of their value, hitting a record low after the bank’s biggest shareholder — the Saudi National Bank — told news outlets that it would not put more money into the Swiss lender, which was beset by problems long before the US banks collapsed.
The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and sent shares of other European banks tumbling, some by double digits. That fanned new fears about the health of financial institutions following the recent collapse of Silicon Valley Bank and Signature Bank in the US
Speaking Wednesday at a financial conference in the Saudi capital of Riyadh, Credit Suisse Chairman Axel Lehmann defended the bank, saying, “We already took the medicine” to reduce risks.
When asked if he would rule out government assistance in the future, he said: “That’s not a topic. ... We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that’s not a topic whatsoever.”
But Switzerland’s central bank announced late Wednesday that it was prepared to act, saying it would support Credit Suisse if needed. A statement from the bank did not specify whether the support would come in the form of cash or loans or other assistance. At the moment, regulators said, they believe the bank has enough money to meet its obligations.
Credit Suisse then said early Thursday that it is taking measures to shore up its finances, including exercising an option to borrow up to 50 billion francs (US$53.7 billion) from the central bank.
“This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the bank said.
A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned new doubts about the bank’s ability to weather the storm.
Credit Suisse stock dropped about 30percent, to about 1.6 Swiss francs (US$1.73), before clawing back to a 24percent loss at 1.70 francs (US$1.83) at the close of trading on the SIX stock exchange. At its lowest, the price was down more than 85percent from February 2021.
After the joint announcement from the Swiss National Bank and the Swiss financial markets regulator, the shares also made up some ground on Wall Street.
The stock has suffered a long, sustained decline: In 2007, the bank’s shares traded at more than 80 francs (US$86.71) each.

(Latest Update March 17, 2023)