A major Swiss bank is dragging Europe’s stock exchanges down

Not the collapse of the Silicon Valley Bank, but the interview of a major shareholder of the major Swiss bank Credit Suisse pulled the European stock exchanges down on Wednesday. Alois Wögerbauer from Drei Banken Generali describes the reaction of the financial markets as “completely undifferentiated”.

But first things first: After the near-collapse of the Silicon Valley Bank in the USA, the fluctuations were initially limited to the European banking sector, but Credit Suisse, which is heavily involved in the USA, had to give up and lost double-digits.

Swiss bank in a tailspin

On Wednesday, the President of the new major shareholder, Saudi National Bank, Ammar Al Khudairy, said on Reuters TV that he would not be able to inject fresh funds into Credit Suisse for regulatory reasons. These would occur with an increase in the proportion of more than ten percent. CEO Ulrich Körner tried to calm things down: “Our capital and liquidity base is very, very strong,” he said in an interview with the Asian TV station Can. Chairman of the Board of Directors Axel Lehmann later said to “Bloomberg” that state aid was “not an issue” for the bank. But that was too many words.

By early afternoon, almost four times as many Credit Suisse titles had changed hands as on an average day. A stock exchange trader spoke of a “sales panic” that would have unsettled market participants beyond the banking sector. Since the previous year, Credit Suisse has had Körner, a reorganizer at the helm, and in February the institute announced a loss of CHF 7.3 billion, the highest since the 2008 financial crisis.

In the wake of Credit Suisse, the entire European banking sector lost 6.8 percent by Wednesday afternoon. The professional investor Wögerbauer: “All banks in Europe will be held liable.” Because the bank stocks in the Vienna stock index ATX are heavyweights, they have also pulled the leading index deep down. Wögerbauer emphasizes that both banks currently in focus have problems due to “classic mismanagement”.

ECB in the shadow of losses

The turbulence on the capital markets means one thing above all for the upcoming interest rate decision by the European Central Bank (ECB) on Thursday: a more cautious view of the future. The rate hike of 0.5 percent is priced in and will come, according to the unanimous opinion on Wednesday. In any case, the ECB was pricked up and sounded out large European banks for their financial connections to Credit Suisse.

Wögerbauer said that until two weeks ago, further interest rate increases of up to 4.5 percent were considered secure. The current turbulence on the financial markets and the slowdown in the economy could now slow down the extent of the interest rate hikes by the top inflation watchers. It will remain restless on the stock exchanges in the near future: “It’s a wild ride and it will stay that way for a while.”