Joy Over Credit Suisse Rescue Fleeting as Bank Shares Tank

After early investor relief about efforts to stop a banking crisis quickly dissipated, shares of Credit Suisse and UBS slumped. Credit Suisse shares tanked 62% in premarket trade to a new low, while UBS lost 7.1%.

Banking stocks and bonds in several markets plunged on Monday after UBS Group sealed a state-orchestrated takeover of troubled fellow-bank Credit Suisse Group AG. In an attempt to restore confidence in a battered sector, Swiss regulators coordinated a deal that will see UBS Group AG pay $3.24 billion for the ownership of Credit Suisse Group AG and assume up to $5.4bn in losses.

The day saw heavy falls in Asian financial markets as early investor optimism over the rescue

operation evaporated. Standard Chartered Plc and HSBC shares each fell more than 6% in Hong Kong on Monday to more than two-month lows, with HSBC facing the reality of posting its largest one-day drop in half a year. The respected MSCI index for financial stocks in Asia ex-Japan was down 1.3%.

In a global response not seen since the height of the pandemic, the US Federal Reserve said it had joined central banks in Canada, England, Japan, the EU and Switzerland in a cooperative action to boost market liquidity. The European Central Bank also vowed to support eurozone banks with loans, if needed.

However, analysts believe it should be clear that after more than a week into the banking panic, and two interventions organized by monetary authorities, the problem is not going away.