By Rachna Uppal

RIYADH (Reuters) -The head of Credit Suisse Group's largest shareholder, Saudi National Bank (SNB), said on Wednesday it would not buy more shares in the Swiss bank on regulatory grounds.

"We cannot because we would go above 10%. It’s a regulatory issue," SNB chairman Ammar Al Khudairy said in an interview with Reuters. The Saudi bank holds a 9.88% stake in Credit Suisse, according to Refinitiv data.

Trading in the Swiss bank's shares was halted late morning as they fell by a fifth to fresh record lows, having been pummelled earlier in the week in market fallout from the collapse of Silicon Valley Bank.

Switzerland's second-biggest bank is seeking to recover from a string of scandals that have undermined the confidence of investors and clients. Customer outflows in the fourth quarter rose to more than 110 billion Swiss francs ($120 billion).

Al Khudairy said SNB was happy with Credit Suisse's turnaround plan and did not think it would need more money, but also described his bank's investment as an opportunistic one that was not time-dependent. The Saudi bank would exit when proper value to the shares had been acquired, he added.

At 1046 GMT, Credit Suisse shares were trading down 20% at 1.7840 Swiss francs

"We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank," Al Khudairy said on the sidelines of a conference in Riyadh.

"I don't think they will need extra money; if you look at their ratios, they're fine. And they operate under a strong regulatory regime in Switzerland and in other countries."

The Saudi lender acquired a stake of almost 10% last year after it took part in Credit Suisse's capital raising and committed to investing up to 1.5 billion Swiss francs ($1.5 billion).

Credit Suisse on Tuesday published its annual report for 2022 saying the bank had identified "material weaknesses" in controls over financial reporting and not yet stemmed customer outflows.