What's going on with Credit Suisse and why is it impacting ASX 200 shares?

Credit Suisse shares plunged 24% last night and were automatically halted.

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Key points

  • Shares in Credit Suisse plummeted 24% overnight after its major shareholder refused to increase its stake in the Swiss bank 
  • Credit Suisse is beset with problems and the share price is now down more than 50% over the past six weeks 
  • Australian banking shares opened lower this morning due to fears of a global banking system contagion stemming from two US bank collapses over the past week 

S&P/ASX 200 (ASX: XJO) shares are 154 points lower this morning following tumultuous trading sessions overnight across Europe and in the United States.

Central to the stock market falls are fears that Switzerland's second-biggest bank is in trouble and a contagion in the global banking system is underway following the collapse of two US banks over the past week.

Here are the share price movements of the big four ASX bank shares in early trading today:

  • The National Australia Bank Ltd (ASX: NAB) share price is down 2.33%
  • The ANZ Group Holdings Ltd (ASX: ANZ) share price is down 2.36%
  • The Commonwealth Bank of Australia (ASX: CBA) share price is down 1.8%
  • The Westpac Banking Corp (ASX: WBC) share price is down 2.15%.

What's happening with Credit Suisse?

Credit Suisse Group AG (SWX: CSGN) plummeted 24% overnight after its major shareholder refused to increase its stake in the Swiss bank following a 30% fall in the stock price over the past six weeks.

Last night's rout prompted an automatic pause in the trading of Credit Suisse shares. The stock has now lost more than 50% of its value since 2 February and has lost half its market capitalisation since 2021.

The Credit Suisse stock plunge dragged down other European banking stocks and US banking shares overnight as fear spreads that the worldwide banking system may be on shaky ground.

This follows the collapse of Silicon Valley Bank and Signature Bank in the US over the past week.

What's the impact on global markets?

French banking stocks Societe Generale SA fell 12.2% and BNP Paribas SA fell 10.1% overnight. Stock in German bank Commerzbank AG fell 8.7%. European government bond yields also fell.

In the US, the Dow Jones Industrial Average fell by as much as 325 points (1.03%) before rallying. The Dow is currently down 0.87% while the S&P 500 is down 0.7%.

The United Kingdom's FTSE 100 Index fell by 3.8%, which is its biggest single day loss since the war in Ukraine began in late February 2022, according to The Australian.

The Australian quoted City Index and FOREX market analyst Fawad Razaqzada:

You get the picture: investors were panicking. Bloodbath, if you will.

Concerns over another 2008-style financial crises have intensified.

The problems with Credit Suisse

Two days ago, Credit Suisse published its 2022 annual report revealing significant customer deposit outflows.

In a letter to shareholders, Credit Suisse chair Axel P. Lehmann and CEO Ulrich Körner said:

Our financial results for 2022 were significantly affected by the challenging macro and geopolitical environment with market uncertainty and client risk aversion, significant deposit and net asset outflows in the fourth quarter as well as the strategic actions we are taking to build the new Credit Suisse.

Net revenues for 2022 decreased by 34% year on year, driven by declines across all of our divisions.

Credit Suisse has been beset with problems for some time now.

Saudi National Bank (SNB) confirmed overnight that it would not top up its 9.88% holding in Credit Suisse due to regulatory restrictions preventing it from owning more than 10%.

The Swiss central bank has pledged to provide Credit Suisse with extra liquidity if required.

What is the Swiss central bank doing?

Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) issued a joint statement assuring markets that Credit Suisse met their capital and liquidity requirements.

They said:

The Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank SNB assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets.

The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability. Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks.

If necessary, the SNB will provide CS with liquidity.

Reuters reports that European Central Bank (ECB) officials have contacted lenders it supervises to ask about their financial exposures to Credit Suisse.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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