Major European banks saw billions slashed from their share prices today as worries about the safety of their balance sheets swept the market.
At one point, five major European banks were temporarily put on hold after their share prices plummeted as the fallout from the Silicon Valley banking collapse continued to unfold.
The price and volume of stocks fell so fast that automatic protections went off on the exchanges, preventing people from buying and selling.
Credit Suisse, Société Générale, BNP Paribas, Santander, Monte dei Paschi and UniCredit were among the banks hit by the massive sell-off. Spain’s Banco Sabadell shed 9 percent and Germany’s Commerzbank nearly 10 percent, while Deutsche Bank shares fell 8.4 percent.
Trading recovered, but it was an ominous start to the day for an industry that had been hit by the collapse of SVB earlier in the week.
Major European stock markets, including London’s FTSE 100, fell as market fears quickly spread ahead of Chancellor Jeremy Hunt’s House of Commons budget speech.
Shares of Credit Suisse fell 27 percent at times, prompted by the release of the bank’s annual report yesterday, which detailed flaws in its financial reporting controls, and the announcement by the National Bank of Saudi Arabia, its main investor, that it had run out of cash. money. bank.
Asked if they would inject new capital into the ailing bank, Ammar Al Hudayri, chairman of the National Bank of Saudi Arabia, said: “The answer is definitely no for many reasons.
“I will name the simplest reason, which is of a legal nature. Now we own 9.8 percent of the bank’s shares. If we get more than 10 percent, all sorts of new rules will come into effect, whether it’s our regulator, the European regulator or the Swiss regulator. We are not inclined to switch to a new regulatory regime.”
Credit Suisse’s annual report notes “material deficiencies” in its control over financial reporting, another blow to a once-powerful institution that has recently been engulfed in scandal.
The bank’s chief executive, Axel Lehmann, has previously said the Swiss government bailout is “not a problem” for the lender as it aims to boost confidence from customers, shareholders and regulators.
The Swiss National Bank declined to comment on the situation with Credit Suisse, Switzerland’s second largest bank.
Big problems in the banking sector began last week with the collapse of SVB, the 16th largest bank in the US. The company, which specialized in lending to technology companies, was closed by US regulators in the largest US bank failure since 2008. The UK division of SVB was acquired by HSBC for £1.
Following the collapse of SVB, New York’s Signature Bank also filed for bankruptcy, and US regulators guaranteed all deposits at both banks.
Joe Biden and Rishi Sunak have reassured customers that banks are safe amid growing fears that even sane players in the market could face an onslaught of customers trying to withdraw their deposits.
“Markets are very sensitive to negative news after the sudden disappearance of a US bank,” said François Lavier of Lazard Frères Gestion. “With market sentiment already easing, it doesn’t take long to weaken it further,” he told Bloomberg.
Market fears also spilled over into the United States, where shares of regional and major banks fell ahead of the opening of US markets. PacWest Bancorp lost 12 percent. Large banks such as JP Morgan Chase, Citigroup and Bank of America were also hit, falling 2-4%.
Larry Fink, head of investment group BlackRock, warned that the US regional banking sector remains at risk and predicted high inflation and rate hikes to continue.
He described the financial condition as “the price of easy money” and said in an annual letter to shareholders that he expected the Federal Reserve to raise interest rates again.
He said a “liquidity mismatch” could follow a regional banking crisis as low interest rates prompted some asset owners to increase their holdings in hard-to-sell high-yielding assets.
The rapid rise in interest rates has made it harder for some companies to repay or repay loans, increasing the chance of losses for lenders who are also worried about the recession.
This story will be updated.
Source: I News
I am Moises Cosgrove and I work for a news website as an author. I specialize in the market section, writing stories about the latest developments in the world of finance and economics. My articles are read by people from all walks of life, from investors to analysts, to everyday citizens looking for insight into how news will affect their finances.