NEW YORK (AP) -- Credit Suisse Group stock fell 10 percent after Switzerland's central bank said it should strengthen its balance sheet, either by stopping paying dividends or by selling shares.
THE SPARK: The Swiss National Bank Thursday published its annual report on financial stability. It said the nation's two largest banks, Credit Suisse Group and UBS, should improve their balance sheets to be better prepared for a financial contagion in Europe.
UBS was bailed out by the Swiss government in 2008.
THE BIG PICTURE: Switzerland, which doesn't use the euro, is especially worried about the collapse of a euro zone bank and its effect on its banks, who are lenders to or do business with several of the banks in the 17 countries that use the euro.
"The risk of a major bank failure remains substantial," the Swiss National Bank warned.
Switzerland's concerns stem from the fact that the European debt crisis is worsening. Spain has admitted it needs help to rescue its banks. And, in a national vote on Saturday, Greeks will choose a party that could pull that country out of the euro.
THE ANALYSIS: For shareholders this is not good news. They might have to forego their annual dividend of 0.75 Swiss francs per share. And, if the bank sells more shares, existing shareholders' stakes are diluted.
Credit Suisse's earnings in the last couple of quarters haven't been great. The bank reported a 95 percent drop in net profit for the first quarter, when it took big charges on its debts. For the fourth quarter of 2011, it reported a loss.
SHARE ACTION: Credit Suisse Group AG shares fell $1.85, or 9.3 percent, to $17.99 in mid-afternoon trading.