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Asian markets fell as global banking fears spread

Stock markets across Asia fell on Thursday as problems at international banking giant Credit Suisse fueled fears of a broader banking crisis.

Major indexes in Japan, Hong Kong, and Australia fell more than 1 percent as bank shares suffered more profound losses.

It came after Credit Suisse said it would borrow up to 50 billion Swiss francs ($54 billion; £44.5 billion) to shore up its finances.

The bank’s shares fell after identifying “weaknesses” in its financial statements.

The BBC understands that the Bank of England has contacted Credit Suisse and the Swiss authorities to monitor the situation.

Problems in the US banking sector surfaced last week with the collapse of Silicon Valley Bank, the country’s 16th largest bank, followed two days later by Signature Bank.

Credit Suisse’s performance was “supported by problems at smaller banks,” Sayuri Shirai, an economics professor at Tokyo’s Keio University, told the BBC.

“Investors and lenders are worried about the risks. Banks can suffer from fundraising, which will, in turn, affect financing costs for SMEs and start-ups around the world,” he added.

Japan’s Nikkei 225 Index fell 1.1 percent in Central Asian trading. The Topix Banks Index fell more than 4% after posting its worst day in three years earlier this week.

Shares in Mitsubishi UFJ Financial Group, the country’s biggest lender by assets, fell 3 percent. This is the same as losses at partners Sumitomo Mitsui Financial Group and Mizuho Financial Group.

Hong Kong and Sydney Indexes fell more than 1.5 percent, while the Shanghai Composite fell 0.5 percent.

“Markets could quickly return to normal once the US-centric episode fades. Fears of greater contagion are limited for now as Asian banks are much better capitalized,” said Stephen Innes, managing partner at SPI Asset Management.

Founded in 1856, Credit Suisse has faced a number of scandals in recent years, including accusations of money laundering and other problems.

It is losing money in 2021 and again in 2022 and has warned it is unlikely to be profitable until 2024.

Tuesday’s “material weakness” announcement in the bank’s financial report deflected renewed investor concern.

They increased when Saudi National Bank, Credit Suisse’s largest shareholder, said it would no longer buy shares in the Swiss bank for regulatory reasons.

Credit Suisse emphasized that its financial condition was not problematic at that time. But the lender’s shares ended down 24% on Wednesday as other banks scrambled to reduce their exposure to the company and the prime ministers of Spain and France spoke to allay fears.

On Thursday, Credit Suisse said it would borrow up to CHF 50 billion from the Swiss central bank “to strengthen its liquidity on a preventive basis.”

The collapse of Silicon Valley Bank also fueled concern about the value of bonds held by banks, as rising interest rates make those bonds less valuable.

Central banks worldwide – including the US Federal Reserve and the Bank of England – have been raising interest rates sharply to curb inflation.

Banks tend to hold large bond portfolios and are therefore exposed to significant potential losses. A decline in the value of bonds banks hold is not necessarily a problem unless they are forced to sell them.

Silicon Valley Bank, which specializes in lending to technology companies, was shut down by US regulators on Friday in the biggest US bank failure since 2008.

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