Financial instability centred on the banking system is back firmly to the fore overnight, Credit Suisse currently at the centre of the storm, its stock ending the European day some 24% down.

This comes after the firm’s auditor on Tuesday morning disclosed “material weaknesses” in the bank’s financial reporting controls, and then on Wednesday the chair of its largest shareholder, the Saudi National Bank (SNB), asked whether he was open to providing more capital to Credit Suisse if there was a call for additional funding, reportedly replied “absolutely not”.  

Bloomberg has since reported that bank leaders and government officials have held talks about options including a public statement of support and a potential liquidity backstop.

Also amongst ideas being floated, Bloomberg says, are a separation of the bank’s Swiss unit and a ‘long shot’ tie up with larger Swiss rival UBS. And just in the last hour, the SNB has said it will provide liquidity to Credit Suisse ‘if necessary’.

The earlier Bloomberg report (out soon after 5:00 AEDT) had some impact in stabilising stock markets.

Europe was already shut for the day (Eurostoxx 50 -3.5%) but the S&P500 rallied from around 3,860 to 3.895 on the news (about 0.9%) – gains which were holding with an hour of NYSE trade still to come.