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Shares of Credit Suisse tumbled more than 20% on Wednesday to hit a new all-time high after its biggest backer appeared to rule out providing more funding for the Swiss lender in difficulty.
In an interview with Bloomberg, the president of the Saudi National Bank said he would not increase his stake in Credit Suisse.
“The answer is absolutely no, for many reasons. I will cite the simplest reason, which is regulatory and statutory. We now own 9.8% of the bank – if we go over 10%, all kinds of new rules come into effect, whether by our regulator, the European regulator or the Swiss regulator,” Ammar Al Khudairy told Bloomberg. “We are not inclined to enter a new regulatory regime.”
He made similar comments to Reuters on the sidelines of a conference in Saudi Arabia.
Once a big player on Wall Street, Credit Suisse has been hit by a series of missteps and conformity defects over the past few years which have damaged its reputation with clients and investors, and cost several senior executives their jobs.
Clients withdrew 123 billion Swiss francs ($133 billion) from Credit Suisse last year – mostly in the fourth quarter – and the bank posted an annual net loss of almost 7.3 billion Swiss francs (7, $9 billion), its largest since the 2008 global financial crisis.
In October, the lender embarked on a “radical” restructuring plan that involves cutting 9,000 full-time jobs, splitting up its investment bank and focusing on wealth management.
The Saudi National Bank – which describes itself as the kingdom’s largest bank – has committed $1.5 billion of the $4 billion in new capital Credit Suisse has raised to fund its overhaul.
Al Khudairy said he was happy with the restructuring, adding that he did not believe the Swiss lender would need additional money.
“We are happy with the plan, the transformation plan that they have come up with. It is a very strong bank,” Al Khudairy said in the interview with Reuters.
“I don’t think they will need any extra money; if you look at their ratios, they are fine. And they operate under a strong regulatory regime in Switzerland and other countries,” Al Khudairy said.
But the bank’s shares were trading on Wednesday in Zurich up nearly 22% and the cost of buying default risk insurance from Credit Suisse hit a new high, according to S&P Global Market Intelligence.
Credit Suisse declined to comment. The Swiss National Bank also declined to comment and the European Central Bank said it “cannot comment on individual banks.” The ECB has an indirect role in regulating Credit Suisse due to its presence in Eurozone countries such as Germany, Italy and Spain.
The crash spread to other European banking stocks, with French and German banks such as BNP Paribas, Societe Generale, Commerzbank and Deutsche Bank falling between 8% and 10%.
The blows are linked for the second largest bank in Switzerland. On Tuesday, he acknowledged a “material weakness” in his financial reports and cut bonuses for senior executives.
Credit Suisse said in its annual report that it found “the group’s internal control over financial reporting to be not effective” because it failed to adequately identify potential risks to the financial statements.
The bank is urgently drawing up a “remediation plan” to strengthen its controls.
Speaking to Bloomberg TV on Tuesday, Credit Suisse CEO Ulrich Körner said the bank saw “good inflows” of money on Monday, even as markets spooked over the collapse of Silicon Valley Bank. and Signature Bank in the United States.
Overall, outflows from the bank have “considerably moderated” after customers withdrew 111 billion francs ($122 billion) in the three months to December, Körner added. In its annual report, the bank said the outflows had not yet reversed as of the end of last year.
Körner said SVB’s collapse was “a bit of an isolated issue”. Credit Suisse follows “materially different and higher standards for capital funding, liquidity, etc.,” he added.
— Olesya Dmitracova and Livvy Doherty contributed to this article.