Credit Suisse saw its shares plummet on Wednesday to a new record low after it was announced that its biggest backer, the Saudi National Bank, would not increase its stake in the bank further. In a joint statement, Credit Suisse’s regulator, the FINMA, stated that it was ready to provide financial support should it be necessary, a move that was praised by Credit Suisse CEO, Ulrich Korner. Along with a series of compliance issues, Credit Suisse lost CHF $133bn ($133bn) of customer funds last year, and announced its biggest net loss ($7.9bn) since the crisis of 2008.
Commentators believe the bank may now have difficulty absorbing losses by 2023 as its funding costs are proving prohibitive. Some recommend that Credit Suisse conduct another share issue or be broken up, or both. Given the bank’s global, interconnected status with multiple subsidiaries outside Switzerland and including the US, the bank is seen “not just a Swiss problem but a global one.”
Credit Suisse is now urgently developing a “remediation plan” to strengthen its financial controls, and on Tuesday announced that it had found a “material weakness” in its financial reporting and had scrapped bonuses for top executives. Meanwhile, its Chair, Urs Rohner, appears keen to stress that its growth prospects in digital, emerging markets remain strong; as he said on Wednesday “in a world of low growth, you cannot expect growth to come only from one source … [In] the fourth industrial revolution, there are a lot of markets where growth is happening.”
Alongside Credit Suisse, most European banks were hit on Wednesday with French and German banks such as Societe Generale, Deutsche Bank and BNP Paribas falling between 8 to 12% on market fears. The cost of buying insurance against the risk of a Credit Suisse default hit a new record high, according to S&P Global Market Intelligence.