Worsening crisis at Credit Suisse raises fears of ripple effect for major European lenders
European banks saw their stocks plunge on Wednesday amid the US banking crisis.
Trading had to be halted for a number of bank stocks, including Credit Suisse, due to heavy losses. The Swiss banking giant was down 28% in afternoon trading, while Societe Generale, which also temporarily halted trading, was down 12%.
Shares of the troubled Swiss bank hit a new all-time low for the second day in a row on Wednesday after its main investor, the Saudi National Bank, said it would not be able to provide further financial assistance in due to regulatory restrictions.
Trading in the investment bank’s shares was halted several times on Wednesday morning as the share price fell below two Swiss francs ($2.17) for the first time.
The fall of Credit Suisse sparked a broader banking selloff as fears mounted over the strength of the European banking sector with a number of bank failures in the United States still looming. BNP Paribas fell 10.7%, Commerzbank 8.9% and Deutsche Bank 7.8%.
Economists have warned that the banking route has been taken on another “disturbing twist.”
“The concern is that banks sitting on large unrealized losses in their bond portfolios may not have sufficient reserves in the event of rapid withdrawal of deposits,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Earlier, famed economist Robert Kiyosaki, who predicted the collapse of Lehman Brothers in 2008, warned that Credit Suisse would be the next to fail after several US banks failed.
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