Credit Suisse majority investor sparks fear among bank’s shareholders

Fear of Credit Suisse going under has gripped the Swiss capital market after its majority shareholder, Saudi National Bank (SNB), said it could no longer provide funds for the Swiss lender.

Saudi National Bank, which bought 9.9 per cent stake in Credit Suisse last year, revealed that it could no longer provide capital whenever the lender was in need of a financial bailout.

In 2022, Saudi National Bank participated in a $4.2 billion fundraising run by Credit Suisse, pledging an investment value of $1.5 billion (1.5 billion Swiss francs).

According to the largest investor on Wednesday, providing more capital will push its stake to 10 per cent, which will breach the regulatory restrictions that prevent the shareholder from holding 10 per cent ownership.

Saudi National Bank Chairman, Ammar Al Khudairy, told Reuters that “We cannot because we would go above 10%. It’s a regulatory issue.”

Although he doused fear of Credit Suisse in need of financial assistance, stating, “I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries.”

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The comment was enough to spark fear among equity investors, as Credit Suisse’s share fell for the first time under 2 Swiss francs ($2.17) in the Swiss capital market.

It recorded a new all-time low, trading around 1.78 Swiss francs at some point during Wednesday’s session and fell as low as 30 per cent, before regaining part of the loss by closing down at –24 per cent.

The fear among the capital market followed the failure of two major banks in the United States; Silicon Valley Bank and Signature Bank.

Both banks liquidated due to the financial crisis amid soaring inflation and increased interest rates in the United States. This has sparked fear of contagion in the European financial markets.

As a result of the fear of a financial crisis in Swiss Credit, which posted 7.3bn Swiss francs (£6.6bn) loss for 2022, Swiss authorities released a statement to assure of financial support if the lender needed it.

“The Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank SNB assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets.

“The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability. Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity,” FINMA and the Swiss National Bank said in a joint statement.

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