March 15th 2023
Credit Suisse shares plunge as bank fear widens
by Simon Read & Natalie Sherman/BBC
Shares in troubled Swiss banking giant Credit Suisse have plunged to a record low as investors remain on edge after the collapse of Silicon Valley Bank.
Credit Suisse's shares sank by 30% at one point, extending declines from Tuesday, when it disclosed "material weakness" in its accounting controls.
Investors are worried about how the bank, beset by problems, will handle the fallout from US bank failures.
The worries spread across share markets with all major indexes falling sharply.
"The problems in Credit Suisse once more raise the question whether this is the beginning of a global crisis or just another 'idiosyncratic' case," wrote Andrew Kenningham of Capital Economics.
The bank insisted its financial position was not a concern, with the chief executive saying its cash reserves were "still very very strong."
But fear of problems at such a big international player put pressure on banking shares around the world.
Prime ministers in Spain and France spoke out in an attempt to reassure investors, as the Stoxx Europe banking share index tumbled 7%.
Major indexes across Europe also dropped. London's FTSE 100 closed down nearly 3.9%, France's CAC 40 fell roughly 3.5% and Germany's DAX dropped more than 3%. In Spain, the IBEX 35 ended more than 4% lower.
The three major exchanges in the US also fell, as shares in banks big and small were hit.
Problems in the banking sector began in the US last week with the collapse of SVB, the country's 16th-largest bank.
The bank - which specialised in lending to technology companies - was shut down by US regulators on Friday in what was the largest failure of a US bank since 2008. SVB's UK arm was snapped up for £1 by HSBC.
In the wake of the SVB collapse, New York-based Signature Bank also went bust, with the US regulators guaranteeing all deposits at both.
"It's too early to know how widespread the damage is," Laurence Fink, chief executive of investment giant BlackRock wrote in an annual letter to investors. "The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge."
Credit Suisse, founded in 1856, has faced a string of scandals in recent years, including money laundering charges and other issues.
It lost money in 2021 and again in 2022 - its worst year since the financial crisis of 2008 - and has warned it does not expect to be profitable until 2024.
Shares in the firm had already been severely hit before this week - their value falling by roughly two-thirds last year - as customers pulled funds, including 110bn Swiss francs ($120bn) in the last three months of 2022.
"This banking crisis came from America. And now people are watching how the whole thing could also cause problems in Europe," Robert Halver, head of capital markets at Germany's Baader Bank, told the BBC.
"If a bank has had even the remotest problem in the past, if major investors say we don't want to invest any more and don't want to let new money flow into this bank, then of course a story is being told where many investors say we want to get out."
One of the problems that hit SVB was that it was forced to sell US government bonds that it held in order to raise money.
