GLOBALink | Fallout from collapse of U.S. banks causes more trouble in Europe

Banking giant Credit Suisse lost nearly a fourth of its value Wednesday, amid the growing fallout from the collapse of two regional banks in the United States.

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Wednesday marked the second time in three trading sessions since the collapse of California"s Silicon Valley Bank (SVB), and the subsequent failure of Signature Bank from New York, that European financial stocks were severely battered.

Nevertheless, the dramatic impact on Credit Suisse in trading Wednesday was largely unexpected, since the institution is so large.

According to 2022 data from Insider Intelligence, Credit Suisse was the second-largest bank in Switzerland and the 17th-largest in Europe, with an estimated 730 billion euros (772 billion U.S. dollars) in assets under control.

The Swiss institution saw its share price plummet by 24 percent in trading Wednesday, ending the day at 1.7 Swiss francs in heavy trading. Earlier in the session the shares were down by more than 30 percent.

Wednesday"s fall was the tenth consecutive losing session for the company"s shares. They have lost nearly 40 percent of their value since March 3, when shares traded at 2.78 Swiss francs.

The latest developments have also increased volatility for the Swiss franc compared to the euro, the U.S. dollar, and other leading currencies.

Stock exchanges across Europe were also impacted by Wednesday"s losses.

The DAX blue-chip index on Germany"s Frankfurt Stock Exchange fell by 3.3 percent; in Paris, the CAC-40 index fell by 3.6 percent; shares slipped 4.6 percent in Milan; in Madrid they were down by 4.3 percent; and in Amsterdam by 2.9 percent.

In most cases, financial sector stocks led the retreat as investors worried about further impacts on banking institutions.

The Credit Suisse sell-off was reportedly triggered by a weaker-than-expected annual financial statement, followed by the announcement that a leading shareholder -- the Saudi National Bank -- would not provide new financial support through the acquisition of more shares.

The Swiss National Bank said late Wednesday that it would provide Credit Suisse with cash if required to keep it afloat, although officials said the bank was not at risk of collapse.

Meanwhile, the European Central Bank told other major European lenders to monitor their exposure to Credit Suisse shares of bonds.

European banks have been under pressure over the last 12 months, with inflation rates soaring amid energy supply and trade issues tied to the ongoing conflict between Russia and Ukraine. Rising prices have squeezed profits by pushing bond yields higher. (1 Swiss franc = 1.07 U.S. dollar)

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