Credit Suisse shares drop 30% in bank rout

Credit Suisse shares dropped by as much as 30%, leading a 7% fall in the European banking index, while five-year credit default swaps (CDS) for the flagship Swiss bank hit a new record high, highlighting increasing investor concerns.

Two sources told Reuters that the European Central Bank (ECB) had contacted banks on its watch to quiz them about their exposures to Credit Suisse, with one source saying Credit Suisse’s problems were specific to itself, rather than being systemic.

Europe’s bank index has seen more than 120 billion euros evaporate ($127 billion) in value since March 8. Among the biggest decliners on Wednesday were French lenders Societe Generale, down 12%, and BNP Paribas, off 9%.

“Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse,” said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.

“There has to be some kind of game-changing decisive action to reverse and stabilise the situation,” Exane’s analysts said.

Credit Suisse had appealed to the Swiss National Bank (SNB) and Swiss financial watchdog Finma for a public show of support, the Financial Times reported. However, SNC declined to comment after its largest investor said it could not provide Credit Suisse with more financial assistance because of regulatory constraints.

In the US, regional banks also fell, with First Republic Bank down 18%, Western Alliance Bancorp down 7.5% and PacWest Bancorp off around 16%.

Big US banks such as JPMorgan Chase & Co, Citigroup and Bank of America Corp slid by between 1.7% and just over 5%.

BlackRockChief Executive Laurence Fink described the financial situation as the “price of easy money” and said in an annual letter that he expected more US Federal Reserve interest rate increases.

Published in The Express Tribune, March 16^th, 2023.

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