The more than 20 percent fall in Credit Suisse's share price repeatedly led to a trading stop for the shares of the major bank on the Swiss stock exchange SIX on Wednesday. However, a suspension of stock exchange trading was not requested. A SIX spokesman said this when asked: "This is not the case." Trading is automatically stopped by the exchange if a requested price deviates by more than 1.5 percent from the last executed quotation. The break can be up to five minutes. The measure is intended to prevent a so-called flash crash.
The shares of crisis-ridden Credit Suisse fell below two francs for the first time in the morning. At times, the quotation fell by 23.8 percent to a record low of 1.707 francs. At the same time, hedges against defaults on the Bank's bonds became more expensive again. Five-year credit default swaps (CDS) rose to a record high of 574 basis points, data from S&P Market Intelligence showed. This means that an investor has to pay 574,000 euros to insure bonds with a volume of 10 million euros.
The Swiss National Bank (SNB) has declined to comment on the situation of the major bank following Credit Suisse's share price crash. The largest shareholder, Saudi National Bank, had stated that it could not provide Credit Suisse with any more money because it was not possible to hold more than 10 percent for regulatory reasons.
Deutsche Bank under pressure
As a result of Credit Suisse's price slide, the stock market values of other major banks also fell significantly, especially as they had already come under pressure in recent days due to the turbulence surrounding the insolvency of the American Silicon Valley Bank (SVB). The shares of Deutsche Bank and Commerzbank temporarily lost around 8 and 10 percent respectively. The German standard value index Dax fell by up to 3.5 percent to 14,703 points. Later, the index was still 2.5 percent in the red. The European counterpart, the Euro-Stoxx-50, lost up to 3.9 percent to 4018 points. "The issues are not over yet," said a trader with a view to the fear of the consequences of the collapse of the American Silicon Valley Bank. The European banking index lost more than six percent.
The rapid rise in interest rates has made it more difficult for some companies to repay or service loans taken out by banks, increasing the risk of losses for lenders who are also worried about recession. In addition, the bond holdings on the balance sheets have lost value due to the sharp interest rate hikes by central banks, so that institutions make losses if they sell the securities before maturity.
After the collapse of the SVB and another US bank last week, regulators and financial managers around the world struggled to allay fears of contagion. Above all, however, concerns about smaller institutions remained constant.
At the same time, interest rate concerns put the stock markets under pressure again. According to an insider, the ECB's monetary watchdogs are likely to stick to the planned big interest rate hike of half a percentage point on Thursday, despite the recent turbulence in the banking sector. Because the ECB expects that inflation will remain too high in the coming years, said an insider.
In view of the shock waves after the SVB bankruptcy, doubts had initially arisen about the ECB's determination to raise interest rates again. "It cannot be assumed that the ECB will be dissuaded from the path of US bank failures," said Thomas Altmann, portfolio manager at asset manager QC Partners.