By Liam Cosgrove
Shares in Credit Suisse fell to a new record low for a fifth straight day on March 15, after its largest investor, the Saudi National Bank (SNB), ruled out increasing its stake in the Swiss bank due to regulatory restrictions.
Shares of Switzerland’s Credit Suisse ended the session down 24 percent; The bank’s American deposit receipts sold in the US fell 14 percent. Shares of other U.S.-based banks also took a hit, with JPMorgan closing down nearly 5 percent and Wells Fargo and Goldman Sachs closing down about 3 percent. Bank of America was down less than 1 percent.
Trading in Credit Suisse shares was halted several times on the Swiss exchange as the stock fell below 2 Swiss francs on each exchange and below $2 on the New York Stock Exchange for the first time. The sharp drop in Credit Suisse’s share price also contributed to a broader decline in European lenders, with Société Générale, Banco de Sabadell and Commerzbank the worst hit.
In an environment of dry liquidity, investors are shocked to hear that Saudi money may be stopped.
Last year, the SNB took a 9.9 percent stake in Credit Suisse to support a strategic overhaul to improve investment banking and address risk factors. In an interview with Reuters on March 15, the Middle East bank revealed that it wanted to increase its stake in Credit Suisse but was unable to because of legal hurdles.
“We can’t because we will go from 10 percent. It is a regulatory issue,” said SNB President Ammar Al Khudeiri. He added that the SNB is satisfied with the Swiss bank’s prospects and financial turnaround plan, despite the recent scandals.
“We are satisfied with the plan, the transformation program that they put forward. It is a very strong bank,” he said. “I don’t think they will need additional money. if you look at their ratios, they’re good.”
“They operate under a strong regulatory regime in Switzerland and other countries.”
Credit Suisse CEO Ulrich Koerner said the bank meets all regulatory requirements and its liquidity base is “very, very strong,” he said in an interview with CAN on March 15.
Swiss bailout for Suisse.
Investors remain concerned about the impact of the bank’s latest disclosure that it found “material weaknesses” in its financial reporting processes for 2021 and 2022.
Trouble at Credit Suisse was a long time coming, some hedge fund managers said, and the SNB’s development was no surprise.
“I think this is an absolute non-event,” Harris Cooperman, founder of Pretoria Capital Management, told The Epoch Times. “Everyone has been waiting for this for a decade.”
According to the Financial Times, the bank is seeking state support from the Swiss Financial Market Supervisory Authority and the Swiss National Bank (Swiss central bank). The central bank said in a March 15 statement that it stands ready to support Credit Suisse as it monitors the volatility hitting the global financial system.
“It seems inevitable that the Swiss National Bank will have to step in and provide a rescue,” Opimas analyst Octavio Marenzi told the Financial Times. “The Swiss National Bank and the Swiss government are fully aware that a failure of Credit Suisse, or even any loss of depositors, would destroy Switzerland’s reputation as a financial center.”
Earlier this week, US regulators decided to protect all deposits at the failed Silicon Valley bank and Signature Bank. The move appeared to temporarily arrest widespread panic, but Cooperman resented the decision, saying it rewarded incompetence.
He said. “People must live and die by their own bad decisions.”