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Saudi Bank Chief Resigns After Credit Suisse Comment Triggers Share Price Collapse

Saudi Bank Chief Resigns After Credit Suisse Comment Triggers Share Price Collapse
March 27, 2023


The chairman of Saudi Arabia’s largest lender, the Saudi National Bank (SNB), Ammar Al Khudairy, has resigned from his position, the bank announced on Monday.


Although, Khudairy’s resignation was officially “due to personal reasons,” it came mere days after his comments triggered a share price collapse of Switzerland’s second-largest bank, Credit Suisse.


He categorically stated that SNB would not provide additional capital to the troubled Credit Suisse in an interview with Bloomberg TV on Monday.


Al Khudairy emphatically stated, “The answer is absolutely not, for many reasons outside the simplest reason which is regulatory and statutory.”


Earlier this month, the SNB rejected a plea from Credit Suisse to provide more funding because, according to the lender, owning more than a 10% stake in the Swiss bank would have caused a “regulatory issue” with the Saudi government, RT reports.


The banker’s comments sent shares of Credit Suisse plummeting to their lowest level on record. They also caused more turmoil in a global banking sector still reeling from the recent failures of three US lenders. Credit Suisse narrowly avoided insolvency itself, saved by a government-brokered rescue acquisition by rival UBS.


While Al Khudairy’s statement was not the only source of Credit Suisse’s troubles – the bank has been plagued by deposit outflows since last year surrounding a series of scandals and regulatory issues – it exacerbated the crisis of confidence in the bank, analysts say.


SNB, which is 37% owned by the Saudi sovereign wealth fund, has suffered significant losses on its investment in Credit Suisse, which has plunged by about $1 billion in a matter of months. The Saudi bank has itself lost more than $26 billion in market value since the start of the turmoil.


Swiss government in a brokered deal aimed at shoring up public confidence in the Western financial system and averting a global crisis saw the UBS Group and Credit Suisse Group, two of the biggest names in European banking, coming together.


UBS agreed on Sunday to pay 3 billion Swiss francs ($3.24 billion) in stock to acquire its embattled rival in a takeover underpinned by government guarantees and 100 billion francs in liquidity assistance from Switzerland’s central bank.


The agreed price of 1 UBS share for each 22.48 shares of Credit Suisse values the latter bank at less than half its market closing price on Friday. The transaction requires UBS to absorb up to $5.4 billion in losses at Credit Suisse.


European Central Bank President Christine Lagarde while welcoming the merger said, “I welcome the swift action and the decisions taken by the Swiss authorities.


“They are instrumental for restoring orderly market conditions and ensuring financial stability.”


Credit Suisse last month reported a 2022 net loss of 7.3 billion francs and warned that it would incur another “substantial” loss in 2023 before returning to profitability in 2024. With clients withdrawing their money in droves, Credit Suisse turned to the Swiss central bank for a loan of 50 billion francs last week.


The newly combined bank will boast more than $5 trillion of invested assets. UBS Chairman Colm Kelleher told reporters at a press briefing in Bern, Switzerland that there are “no options” other than closing the acquisition and making it a success. “This is absolutely essential to the financial structure of Switzerland and… to global finance," RT reports.