Shares in Credit Suisse plummeted and sparked declines in other major European banks, amid growing concerns about deeper problems in the world‘s banking system following bank failures in the United States.
Shares in Credit Suisse fell by more than a quarter to hit a record low on the 15th of this month after the bank’s largest shareholder, the National Bank of Saudi Arabia, told news outlets it would not inject more money into the bank, which had already Even before the Bank of America collapse, it was plagued by some long-standing problems.
The turmoil led to an automatic suspension of trading in Credit Suisse’s shares on the Swiss market and sent shares of other European banks tumbling, some by double digits.
These slumps have further fueled concerns about the health of financial institutions in the wake of 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 recouping a 24 percent loss in late afternoon trading on the Swiss SIX stock exchange. to 1.70 Swiss francs (about $1.83). And its lowest share price has fallen by more than 85% from 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 emphasized that it will provide liquidity to the institution when necessary.
“Credit Suisse meets the capital and liquidity requirements for systemically important banks. The Swiss National Bank will provide liquidity if necessary,” 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 banks on both sides of the Atlantic.
The S&P 500 was down 1.8% in afternoon trading. As of 1:11 p.m. 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 slumped – dropping more than $5 a barrel to their lowest level in more than a year, as jitters over a plunge in Credit Suisse offset optimism in world markets over a recovery in Chinese oil demand.
At a financial conference held in the Saudi capital Riyadh on the 15th of this month, Credit Suisse Chairman 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 an issue. We are regulated. We have strong capital ratios, we have strong balance sheets. We are all in this , so this is not a question that can be discussed.”
A day earlier, Credit Suisse reported that by the end of last year, managers had found “significant deficiencies” in the bank’s internal controls over financial reporting. And that further raised questions about the bank’s ability to weather the storm.
The turmoil comes a day before the European Central Bank meets. Before the U.S. 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 push to fight inflation. Now, the market is closely watching whether the bank can continue to implement this measure amid the recent turmoil.
The U.S. Treasury Department said it was paying attention to the crisis encountered by Credit Suisse and was in touch with relevant global institutions on this incident.
William Lee, chief economist at the Milken Institute in the United States, said the Saudi decision showed that Credit Suisse was facing deeper problems.
“The Saudis believe that Credit Suisse may be in more trouble than imagined, and their decision underscores the need for investors to investigate the soundness of large global banks,” he told Al Jazeera.
