Credit Suisse leads Europe bank stock rout after short-lived SVB respite

A fresh 18% drop in embattled Swiss lender Credit Suisse led the wider European banking index lower

Europe's bank stocks came under pressure again on Wednesday, with Credit Suisse tumbling to a new low, as investors continued to worry about stress within the sector following Silicon Valley Bank's collapse.

Regulators and financial executives around the world have sought to assuage contagion concerns after tech-focused lender SVB and another U.S. bank failed last week, but worries persist about the health of smaller institutions in particular.

A fresh 18% drop in embattled Swiss lender Credit Suisse led the wider European banking index lower.

Rapid rises in interest rates have made it harder for some businesses to pay back or service the loans they took from banks, increasing the chances of losses for lenders who are also worried about a recession.

However, European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, a source told Reuters, as they expect inflation will remain too high in coming years.

Investors had begun to doubt the ECB's commitment to another big rate hike as SVB's collapse sent shockwaves across markets.

But the source said the euro zone's central bank was unlikely to ditch its plan to raise rates by 50 basis points on Thursday because doing so would damage its credibility.