The Swiss National Bank, the country’s financial regulator, said on Wednesday that it would financially support Credit Suisse, if necessary, after the bank’s stock price plunged to a record low a day after it had warned of problems in its financial reports.
A decline of about 24 percent in Credit Suisse’s shares raised new worries about the banking industry on a day when broader European stock markets suffered sharp losses. The price of its bonds dropped as much as 47 percent and the cost of financial contracts that insure against a default by the bank spiked, according to Markit, a data provider.
The bank’s largest shareholder, Saudi National Bank, earlier ruled out providing more money for Credit Suisse as it struggles with its latest turnaround plan.The turmoil in Europe came as investors were already anxious over the collapse of Silicon Valley Bank and Signature Bank in the United States last week. Though those banks are relatively small, their sudden shutdown has sent a shudder through financial markets as investors worry about spiraling risk in the system.
Credit Suisse’s troubles, however, are largely separate, and of its own making. The firm has suffered blow after blow in recent years, from big trading losses to spying scandals that led to ouster of a chief executive.
“The problems of certain banks in the U.S.A. do not pose a direct risk of contagion for the Swiss financial markets,” the Swiss National Bank said in a joint statement with the Swiss Financial Market Supervisory Authority.
Credit Suisse had hoped that a plan announced in October to restructure itself, a reorganization that called for spinning off its investment bank to concentrate on managing global elites’ wealth, would be enough to turn around its fortunes.
But it instead has continued to beat back negative news, including the disclosure on Tuesday that it had found “material weakness” in its financial reporting controls. That discovery came after queries by the Securities and Exchange Commission, which forced the company to delay publication of its annual report.
On Wednesday, the chairman of the state-owned Saudi National Bank — which, as part of the firm’s turnaround plan, agreed to invest up to $1.6 billion for a nearly 10 percent stake, making it the Credit Suisse’s largest shareholder — ruled out any more investments in the firm.
But the reason the Saudi bank provided did not have to do with losing faith in Credit Suisse’s finances.
Asked on Bloomberg Television if Saudi National Bank would help finance additional turnaround efforts, the chairman, Ammar Al Khudairy, said, “The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory.”
If Saudi National Bank were to raise its stake above 10 percent, it would be subject to additional Swiss regulations that Mr. Al Khudairy said he was not interested in becoming subject to.
Mr. Al Khudairy added that he was satisfied with Credit Suisse’s turnaround plan and believed the firm would not need additional capital, according to Reuters.