European bank stocks sink on US contagion fears

An escalating crisis at Credit Suisse has sparked fears of a spillover effect for major lenders

European banks saw their shares nosedive on Wednesday amid the unfolding US banking crisis.

Trading had to be halted for a number of bank stocks, including Credit Suisse, due to the steep losses. The Swiss banking giant was down 28% in afternoon trading, while Societe Generale, which also temporarily halted trading, was down 12%.

Shares of the embattled Swiss bank hit another all-time low for a second consecutive day on Wednesday after its top investor, Saudi National Bank, said it would not be able to provide more financial aid due to regulatory restrictions.

Trading in shares of the investment bank was halted several times on Wednesday morning as the stock price dropped below two Swiss francs ($2.17) for the first time.

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The fall of Credit Suisse triggered a wider banking selloff as fears mounted about the robustness of the European banking sector with a number of US banking failures still looming large. BNP Paribas slumped 10.7%, Commerzbank was down 8.9%, and Deutsche Bank lost 7.8%.

Economists have warned that the banking rout has taken on another “ominous twist.”

“The worry is that banks sitting on large unrealized losses in their bond portfolios might not have sufficient buffers if there is a fast withdrawal of deposits,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Earlier, renowned economist Robert Kiyosaki, who predicted the collapse of Lehman Brothers in 2008, warned that Credit Suisse would be the next to go bust following the failure of a number of US banks.

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