Credit Suisse: what is happening at Swiss bank and should we be worried?
Panic has gripped global banking stocks for the second time in a week: the wave of fear prompted by the collapse of California’s Silicon Valley Bank (SVB) has been followed by fresh jitters overthe stability of major European bank Credit Suisse.
Shares in the Swiss lender plunged more than 30% at one point on Wednesday to a record low of about 1.56 Swiss francs (£1.40) a share, after its top shareholder, the Saudi National Bank (SNB), ruled out providing it with fresh funding because of regulations that cap its stake – now 9.9% – at 10%.
SNB’s chairman, Ammar Al Khudairy, told Reuters that Credit Suisse was “a very strong bank” and was unlikely to need more cash after raising 4bn Swiss francs (£3.59bn) to fund a major restructuring plan in autumn last year. However, his funding cap comments spooked investors, who feared it could limit emergency cash from investors in the Middle East.
That compounded panic about potential weaknesses across a global banking sector still reeling from SVB’s collapse as well as fears over continuing problems at the Swiss lender, which as Europe’s 17th largest lender by assets is far larger than SVB and deemed systemically important to the global financial system.
The Bank of England reiterated its statement that the UK banking system is not at risk and “remains safe, sound, and well-capitalised”. The Guardian understands that staff at the Bank are continuing to monitor developments in the financial sector closely.
Stocks in many other European banks also plunged on Wednesday as traders took fright. However, it is important to remember that share prices reflect investor sentiment rather than the real strength of balance sheets.
Market movements can cause customers to panic and pull cash, creating a
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