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Bank shares battered after Credit Suisse rescue

STORY: The weekend rescue of Credit Suisse by local rival UBS was supposed to reassure markets.

On Monday (March 20) morning it it wasn't clear if that was working.

European markets opened in the red, before clawing out some gains.

Banking shares led early declines, falling 4% before recovering some ground.

Credit Suisse stock collapsed, dropping around 60%.

UBS was down too, losing 4%, with some investors concerned it has merely inherited its rival’s problems.

The falls came after Swiss regulators engineered a state-backed takeover for Credit Suisse.

It’s been roiled by years of scandals, and recently admitted to problems with past financial reports.

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University of Virginia law professor Pierre-Hugues Verdier says watchdogs hoped to limit any fallout:

"I think there may have been hope and there may still be hope that problems are somewhat unique to that institution and can be contained to that institution by an intervention that target target set specifically. But, but I don't know to what extent this will be proven true by events. You know, once a large and highly connected institution such as this runs into trouble, there is always a risk of contagion.”

Analysts say the concern has now shifted to the huge losses that some investors will face as part of the takeover.

Traders also remain anxious over the possibility of further contagion and the fragile state of some U.S. regional banks.

Quite how central banks will manage to simultaneously contain inflation and manage the bank risks is another conundrum.

The weekend also saw coordinated action by central banks in Canada, the UK, Japan, the EU and Switzerland to ensure that lenders had plenty of cash on hand.

If that was meant to reassure markets and restore calm, the signs on Monday morning were mixed at best.