On Wednesday, shares of Credit Suisse fell to a new all-time low for the second day in a row after a major stakeholder in the troubled Swiss bank announced that it would be unable to provide any additional funds due to regulation restrictions. As the stock of the bank continued its freefall throughout the morning, trading in the stock was stopped multiple times before it reached a new bottom.
According to a report by Reuters, the biggest stakeholder in Credit Suisse, the Saudi National Bank, stated that it was unable to provide any further financial assistance to the Swiss bank, which sparked the most recent move downward in the stock price.
“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters on Wednesday. On the other hand, he stated that the SNB is pleased with the plan that Credit Suisse has developed for its transformation and that he believed the bank would not require additional funding.
Swiss authorities announced after the closure of European markets that Credit Suisse is presently in compliance with capital and liquidity requirements. They also stated that the Swiss National Bank will provide additional liquidity if it is required. This revived a broader sell-off among European lenders, which were already experiencing substantial market turbulence as a result of the repercussions from Silicon Valley Bank. The collapse in share prices occurred after the Silicon Valley Bank failed. The Societe Generale bank in France, the Banco de Sabadell bank in Spain, and the Commerzbank bank in Germany were some of the banks that fell the most. On Wednesday, several Italian financial institutions, including UniCredit, FinecoBank, and Monte dei Paschi, were halted in dealing automatically.
After a drop in its share price intensified concerns about a wider scale bank deposit crisis, Credit Suisse announced on Thursday that it was taking “decisive action” to strengthen its liquidity by borrowing up to $54 billion from the Swiss central bank. The company made the announcement in response to the fall in its share price. The problems that have been plaguing the Swiss bank have caused investors and regulators to shift their attention from the United States to Europe. In Europe, Credit Suisse has led a selloff in bank shares.
Along with the intention of borrowing up to $54 billion, Credit Suisse has plans to repurchase approximately three billion dollars’ worth of its existing debt. The financing and buyback are being done with the intention of improving the company’s liquidity and reassuring investors. All of these developments took place just one day after the stock of Credit Suisse plummeted to a new all-time low.