The bank fear and loathing on global financial markets took a turn for the worst with the huge investment bank Credit Suisse in a spot of bother. Until now it was thought that only small banks were under the hammer with their customers likely to want their money, causing a run on the bank.

Now before I scare you further, let me inform you that Michael Burry, the guy who made a fortune shorting US banks and tipped the GFC, is not warning about financial Armageddon around the corner. More on that in a moment.

Back to Credit Suisse, whose shares dived 24% on the news that some big customers were withdrawing money following a string of negative stories linked to the once highly respected Swiss bank. Of late, the business has disappointed investors so it’s no surprise that it’s in the news for the wrong reasons.

The problem for stock markets is that when a big bank reveals a few issues, investors start to worry about other big banks and they withdraw money first and ask questions later. It’s understandable for short-term players/traders. But the long-term investor will grin and bear it, and when it comes to good banks like the CBA, it can be a buying an opportunity, if they have guts!

CNN’s Olesya Dmitracova and Livvy Doherty explained what happened overnight that wasn’t great for the bank’s share price: “The chairman of the Saudi National Bank (SNB) — Credit Suisse’s biggest shareholder, following a capital increase last fall — said earlier Wednesday it would not increase its stake in Credit Suisse.”

This is what Ammar Al Khudairy of the SNB told Bloomberg: “The answer is absolutely not, for many reason — I’ll cite the simplest reason, which is regulatory and statutory. We now own 9.8% of the bank — if we go above 10%, all kinds of new rules kick in, whether it be by our regulator or the European regulator or the Swiss regulator. We’re not inclined to get into a new regulatory regime.”

The market wouldn’t know this and might have thought the Saudis were saying that Credit Suisse stinks! That said, the once legendary Swiss bankers have had a shocker in recent times.

This is what the BBC has to say on the subject: “Credit Suisse, founded in 1856, has faced a string of scandals in recent years, including money laundering charges and other issues.  It lost money in 2021 and again in 2022 - its worst year since the financial crisis of 2008 - and has warned it does not expect to be profitable until 2024.”

Did I imply this was a bank on the nose before all this bank anxiety?

Predictably, the bank says its financial position was not a concern, with the chief executive saying its cash reserves were “still very, very strong”. But many would be thinking: “He would say that, wouldn’t he?”

Fortunately for CS and the market, the Swiss regulator has swung into the action this morning, saying it’s prepared to help the Swiss banking giant “if necessary”, adding that the bank is not at risk.

More importantly, the Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority said in a joint statement that strict rules applied to Swiss financial institutions to “ensure their stability”, bbc.com reported.

“The problems of certain banks in the US do not pose a direct risk of contagion for the Swiss financial markets,” the regulators said.  “Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide [Credit Suisse] with liquidity.”

Let’s hope we can trust those regulators. One guy worth believing is Michael Burry (mentioned above), founder of Scion Asset Management, who was the ‘star’ of the movie “The Big Short” that explained why the GFC happened. (The movie star was actually Christian Bale but Burry was the star in the real world, if we can call the money world real!)

Here's someone who’s usually a Dr Doom type telling us via CNBC that, “…the extraordinary action to backstop regional banks should be enough to resolve the current crisis and stabilize the financial markets.”

In fact, he compared this rescue operation to what the real-life J.P. Morgan did in the so-called “Panic of 1907”.

Here’s a bit of history on the subject from CNBC and Burry: “More than a century ago, the financial crisis known as the “Panic of 1907” took place where there were numerous runs on banks, including Knickerbocker Trust. The crisis was over in just three weeks after J.P. Morgan, founder of the bank that bears his name, pooled money with other financiers to bail out the banking system.”

Of course, he could be wrong because we are dealing with an issue that has a lot of uncertainty, but I liked this tweet from Burry: “This crisis could resolve very quickly. I am not seeing true danger here.”

Interestingly, the Dow finished down 280 but was off over 500 points before the Swiss regulator got involved and the Nasdaq ended just in positive territory.