Problems at Swiss banking giant Credit Suisse spooked markets on Wednesday, sending bank stocks selling off after regaining ground on Tuesday.
The sale was triggered in part when Credit Suisse’s largest shareholder, Saudi National Bank, publicly stated that it would not increase his investment to help stabilize the beleaguered lender. Shares of Credit Suisse fell about 25% on Wednesday to a record high.
Citibank shares fell 5%, while Goldman Sachs, JPMorgan and Wells Fargo each fell about 4% on Wednesday. Bank of America stock was trading around 3% lower.
The Dow and S&P indices were both down more than 1.4% on Wednesday morning, with the tech-heavy Nasdaq trading at least 1% lower. Even markets for assets generally considered safe, such as US government bonds, also fell sharply.
Widespread jitters in Europe and the United States, which comes days after U.S. regulators took over and closed two banksraised new concerns about the difficulties of the global financial sector.
Some of that instability is to be expected, analysts say, because banks around the world are so interconnected and because investors eyeing instability in one part of the industry tend to scan the horizon for others. threats – and to reflect those concerns in their stock trading.
“Credit Suisse is not just a Swiss problem, but a global problem,” Andrew Kenningham, chief economist for Europe at research and advisory group Capital Economics, warned in a note on Wednesday.
That’s partly because Credit Suisse is so big – with $574 billion in assets, it’s more than twice the size of Bank of Silicon Valley – and partly because it has long been seen as the “weakest link among major European banks”, he writes.