What’s Going on With Credit Suisse?

Battered shares of Credit Suisse lost more than one-quarter of their value Wednesday, hitting a record low after its biggest shareholder — the Saudi National Bank — told news outlets that it would not inject more money into the Swiss bank beset by problems long before the failure of two U.S. lenders.

The turmoil prompted an automatic pause in trading of Credit Suisse’s shares on the Swiss market and sent shares of other European banks plunging by as much as double digits. That fanned new fears about the health of financial institutions following the collapse of Silicon Valley Bank and Signature Bank in the United States in recent days.

Credit Suisse stock dropped more than 27%, to about 1.6 Swiss francs ($1.73), in mid-afternoon trading on the SIX stock exchange Wednesday. That’s down more than 85% from February 2021. The shares have suffered a long, sustained decline: In 2007, they were trading at more than 80 francs each.

With concerns about the possibility of more hidden trouble in the banking system, investors were quick to sell bank stocks on bad news. Other European banks took a battering as concerns spread about the sector: France’s Societe Generale SA dropped 12%, France’s BNP Paribas fell more than 10%, Germany’s Deutsche Bank was down 8% and Britain’s Barclays Bank was down nearly 8%. Shares in the two French banks also were briefly suspended.

The tumble came after Saudi National Bank Chairman Ammar Al Khudairy told Bloomberg and Reuters that the key Credit Suisse shareholder has ruled out further investments in the Swiss bank to avoid regulations that kick in with a stake above 10%. Following an announcement in October, Saudi National Bank put in some 1.5 billion Swiss francs to acquire a holding in Credit Suisse of just under 10%.

The Swiss bank was pushing to raise funding from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving Zurich rival UBS.

Speaking Wednesday at a financial conference in the Saudi capital of Riyadh, Credit Suisse Chairman Axel Lehmann defended his bank when asked about management issues, saying, “We already took the medicine” to reduce risks. When asked if he would rule out government assistance in the future, he said “That’s not a topic. … We are regulated, we have strong capital ratios, very strong balance sheet, we are all hands-on deck, so that’s not a topic whatsoever.”

A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned new doubts about the bank’s ability to weather the recent storm.

With global concern rising about banks, European finance ministers said this week that their banking system has no direct exposure to the U.S. bank failures. Analysts say Europe has strengthened safeguards around its banking system since the global financial crisis that followed the collapse of U.S. investment bank Lehman Brothers in 2008.