Stocks plunged Wednesday morning following reports of more trouble in the banking sector. Shares of the Swiss bank Credit Suisse tumbled more than 30 percent after its biggest shareholder, the Saudi National Bank, said it could no longer provide funding.
The news from Europe sowed more fear about the state of banking, which has struggled in the wake of Silicon Valley Bank's (SVB) collapse over the weekend.
Though the bank's financial troubles initially appeared contained, cracks have since appeared in other mid-sized commercial banks in the United States.
Shares of another San Francisco-based lender, First Republic, fell more than 60 percent on fears that the SVB collapse would spread. The company has since secured additional funding from JPMorgan, and its stock bounced back some from the heavy losses.
Meanwhile, Signature Bank actually did collapse over the weekend, as its connections with the cryptocurrency sector and other tech businesses stoked fears among depositors after the collapse of SVB, which also catered to the industry.
But Credit Suisse's problems began long before the latest wave of U.S. bank failures.
The company this week ended executive bonuses after reporting its worst annual performance since the Great Financial Crisis of 2007-2008. It also admitted that its internal financial reporting systems had failed to identify potential risks.
The report noted that "AG did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements within this system."
While the Swiss bank is facing its own issues, there is one striking similarity to the situation at SVB: Depositors are pulling their money out of the bank.
The bank said its weak performance in the fourth quarter of 2022 was due to a "challenging economic and market environment," including "significant deposit and net asset outflows at the beginning of the quarter."
The outflow really ramped up in October of last year after depositors began to lose faith in the bank's ability to manage risk and, in particular, the cost of insuring its debt. Despite an aggressive campaign to win back customers, the exodus continued into this month.