Credit Suisse’s biggest shareholder has ruled out injecting any more cash into the embattled bank, triggering a 20pc slump in its share price and sparking panic in financial markets.
The deepening crisis at the Swiss lender triggered fears of wider contagion in Europe’s banking industry, sending shares in lenders plunging across the continent.
It came after Ammar Al Khudairy, chairman of the Saudi National Bank (SNB), said his company will not invest any more capital into Credit Suisse.
Asked on Bloomberg TV whether SNB was open to further injections of cash into Credit Suisse if there was another call for more liquidity, he said: “The answer is absolutely not, for many reasons outside the simplest reason which is regulatory and statutory.”
Bets that the scandal-hit lender would default on its loans jumped to a fresh record high following the comments and the bank’s share price plummeted.
The slump shook confidence in the wider European financial sector. In London, shares in the UK’s biggest banks including Barclays, NatWest and HSBC fell around 7pc, 5pc and 4pc respectively.
In Europe, trading in Credit Suisse, Societe Generale and several Italian banks was halted owing to steep losses.
Investors have become increasingly worried about the global banking sector following the collapse of Silicon Valley Bank (SVB) and Signature Bank in the US last week.
Larry Fink, chief executive of the world’s biggest money manager, BlackRock, on Wednesday raised the spectre of a “slow rolling crisis” in the US financial system “with more seizures and shutdowns coming”.
Earlier this week, Credit Suisse added to concerns swirling around the sector after admitting it had found weaknesses in its financial reporting controls. It also said customers continued to pull funds from the bank after a series of costly and damaging scandals.
Shares in Credit Suisse have hit repeated new lows this year and are down almost 75pc over the last 12 months.
Speaking earlier on Wednesday, Axel Lehmann, Credit Suisse’s chairman, said government assistance “isn’t a topic” for the bank as it seeks to shore up confidence among clients, investors and regulators.
He added that the company has “a strong balance sheet” and “already took the medicine” following the introduction of a radical restructuring plan in October.
In his annual letter to investors, published on Wednesday, BlackRock’s Mr Fink described the current crisis as the "price of easy money".
He added: “We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the US regional banking sector… with more seizures and shutdowns coming.”
Saudi National Bank, which is 37pc owned by the kingdom’s sovereign wealth fund, became Credit Suisse’s biggest shareholder late last year after acquiring a 9.9pc stake in the Swiss lender.
Following his comments, the price of Credit Suisse’s credit default swaps, which investors buy to protect themselves from companies defaulting on their debts, rose to a new record high. Five-year credit default swaps for Credit Suisse rose to 565 basis points on Wednesday, from 350 basis points at the start of the month.
Mr Al Khudairy of SNB also told Reuters: "We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank.
"I don't think they will need extra money; if you look at their ratios, they're fine. And they operate under a strong regulatory regime in Switzerland and in other countries.”
Meanwhile, Larry Fink, chief executive of the world’s biggest money manager, BlackRock, raised the spectre of a “slow rolling crisis” in the US financial system following the collapse of Silicon Valley Bank, “with more seizures and shutdowns coming”.
Concerns about possible exposure to the crisis also hit shares in asset managers. Prudential fell 10pc in London, while Abrdn dropped 5.8pc. The FTSE 100 was down 2.3pc by lunchtime.