Bank fears spread to Europe, dragging down shares of large lenders

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

At one point, Credit Suisse shares lost more than a quarter of their value after the bank’s largest shareholder – the Saudi National Bank – told news outlets that it would not invest more money in the Swiss lender, which was besieged by I went. long ago problems american banks collapsed,

The turmoil triggered an automatic halt in trading of Credit Suisse shares on the Swiss market and caused shares of other European banks to drop double digits. that fan New fears about the health of financial institutions After the recent collapse of Silicon Valley Bank and Signature Bank in the US

Speaking at a financial conference in the Saudi capital Riyadh on Wednesday, Credit Suisse Axel Lehman defended the bank, saying “we’ve already taken the medicine” to reduce risk.

Asked whether he would rule out government aid in the future, he said: “It is not an issue. … We are regulated. We have strong capital ratios, very strong balance sheet. We’re all on deck, so it’s not an issue.

A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls over financial reporting as of the end of last year. This raised new doubts about the bank’s ability to weather the storm.

credit suisse stock fell up nearly 30%, to around 1.6 Swiss francs ($1.73), before climbing back to a 24% loss at 1.70 francs ($1.83) at the end of trading on the SIX stock exchange. Its lowest price was down more than 85% since February 2021.

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The stock has suffered a long, sustained decline: in 2007, the bank’s shares traded at over 80 francs ($86.71) each.

with concerns about the possibility of more being hidden trouble with the banking systemInvestors were quick to sell bank shares.

France’s Societe Generale SA dropped 12% at one point. France’s BNP Paribas fell more than 10%. Germany’s Deutsche Bank was down 8% and Britain’s Barclays Bank was down nearly 8%. Trading at two French banks was briefly suspended.

The STOXX bank index of 21 major European lenders fell 8.4% on Tuesday after markets were relatively calm.

disturbance came a day ago European Central Bank meeting, President Christine Lagarde said last week, ahead of the US failures, that the bank would raise interest rates by half a percentage point to fight against inflation. Markets were watching closely to see whether the bank moves forward despite the turmoil.

Andrew Cunningham, chief Europe economist at Capital Economics, said Credit Suisse was “a much bigger concern for the global economy”, comparing it to the collapse of US banks.

It has several subsidiaries outside Switzerland and conducts trading for hedge funds.

“Credit Suisse is not only a Swiss problem but a global problem,” he said.

He added, however, that the bank’s “problems were well known so haven’t come as a complete shock to investors or policymakers.”

The troubles “raise the question once again whether this is the start of a global crisis or just another ‘silly’ case,” Cunningham said in a note. “Credit Suisse was seen as the weakest link among Europe’s big banks, but it is not the only bank to struggle with weak profitability in recent years.”

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Leaving a Credit Suisse branch in Geneva, Fadi Rachid said he and his wife are concerned about the health of the bank. He planned to transfer some money to UBS.

“I find it hard to believe that Credit Suisse will be able to get over these problems and recover,” said Rashid, a 56-year-old doctor.

The Swiss National Bank declined to comment. The Swiss Financial Market Supervisory Authority did not immediately respond to calls and emails seeking comment.

Sasha Steffen, professor of finance at the Frankfurt School of Finance and Management, said investors responded to “a wider structural problem” in banking after a long period of low interest rates and “very, very loose monetary policy”.

To earn some return, banks “needed to take on more risk, and some banks did it more judiciously than others.”

Now investors are concerned that the banks have “risks on their balance sheets that they are not aware of and therefore have significant losses that have not yet been realised.”

European finance ministers said this week that their banking systems have no direct link to US bank failures.

Europe strengthened its banking safeguards after the global financial crisis, which shifted supervision of the biggest banks to the central bank following the collapse of US investment bank Lehman Brothers in 2008, analysts said. The central bank is considered less likely than national supervisors to look the other way at developing problems.

Credit Suisse parent bank is not part of EU supervision, but it has entities in several European countries. Credit Suisse is subject to international regulations that require it to maintain financial buffers against losses as one of 30 so-called globally systemically important banks, or G-SIBs.

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Share prices plummeted after Saudi National Bank President Ammar Al Khudairi told Bloomberg and Reuters that the bank refused to invest further in Credit Suisse to avoid rules that would have kicked in with more than a 10% stake. Is.

Saudi National Bank has invested some 1.5 billion Swiss francs To achieve a holding just below that threshold.

Swiss bank is insisting on raising money from investors and is preparing a new strategy to overcome many problems. Bad bet on hedge fundsRepeated shake-up of its top management and a spy case Zurich rival UBS is involved.

In an released on Tuesday, Credit Suisse said customer deposits fell 41%, or 159.6 billion francs ($172.1 billion), at the end of last year compared with a year earlier.


McHugh reported from Frankfurt, Germany. Associated Press writers Joseph Krause in Ottawa, Ontario, and Angela Charlton in Paris also contributed.