Credit Suisse joins the banking crisis

Two US banks failed and were subsequently bailed out by the US government. The market reacted positively at first, but the good news was short-lived. Soon after, news broke of Credit Suisse running into trouble in Europe.

Now, let's catch up with the situation at Credit Suisse.

Why is Credit Suisse important?

Credit Suisse is among the 30 global financial institutions designated as systematically important by the Financial Stability Board, indicating that they are deemed "too big to fail." The significance of this designation lies in the potential repercussions of such institutions collapsing.

In contrast, Silicon Valley Bank and Signature Bank are relatively smaller than Credit Suisse. However, if Credit Suisse were to fail, the banking crisis could worsen and spread more widely due to the magnitude of its impact on the financial system.

What is the issue with Credit Suisse now?

In October 2022, rumors began circulating on social media about an imminent failure of Credit Suisse. While these rumors remain unconfirmed, the implosions of US asset manager Archegos and UK firm Greensill have already cost Credit Suisse more than $5 billion. These scandals are just the latest in a string of high-profile controversies that have plagued the bank in recent years.

In a more recent development, Credit Suisse has admitted to having "material weaknesses" in its internal controls over financial reporting, which has led to the restatement of the cash-flow statements for 2019 and 2020.

Unfortunately for the bank, this news comes at a time when the recent failures of US banks have heightened concerns about the stability of the financial system.

What has been the impact to Credit Suisse?

Credit Suisse's share price saw a sharp decline of 24% overnight. Additionally, the value of its USD bond maturing in 2027 has dropped by 10%.

Despite the market turmoil, Credit Suisse's CEO, Ulrich Koerner, has stated that the bank's capital and liquidity remain "very strong."

It's possible that the negative impression of Credit Suisse among investors and the public is worse than the actual state of the bank's fundamentals.

What is the remedy?

The Swiss central bank reassured that Credit Suisse has adequate capital and liquidity and was prepared to shore up the liquidity at Credit Suisse if required.

Credit Suisse has also said that it will borrow up to 50 billion Swiss francs (US$54 billion).

This came after Saudi National Bank, the largest shareholder of Credit Suisse, said that it would not be investing further due to regulatory limits on owning more than 10% of the bank.

Ultimately, the challenges facing Credit Suisse appear to be rooted in a lack of confidence among investors, which has been compounded by concerns about the unresolved banking issues in the US. This has led some investors to worry about a potential contagion effect.

So what?

In my opinion, the current banking crisis differs from the 2008 crisis in its underlying causes. While the 2008 crisis was brought about by reckless lending practices, the current crisis is a result of banks transitioning from an era of ultra-low interest rates to one of the fastest interest rate hikes in history.

Banks that have not diversified their sources of liquidity are now at risk of experiencing bank runs and potential collapse. This is not just limited to banks in the US, as low interest rates have been prevalent in Europe and Asia as well.

To address this crisis, governments and central banks across the world must work to restore confidence and help banks navigate this transition period.

I'm optimistic that this banking crisis can be resolved, as there is widespread awareness of the magnitude of the problem, which may help prevent a complete collapse of the financial system.

But it may not be resolved without some pain. I expect the stock market to experience more selldowns before it gets better.

# Regional Banks Recover From Crisis?

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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  • ChoedanKal
    ·2023-03-16
    TOP
    i appreciate your optimisim. I however put my chips in the BTC no longer will i trust Trad Fi i feel much happier swapping trust for Verification. by verifiying on the blockchain i take things for how they are not how i want to precieve them. Thanks for your insight Alvin. i do appreciate comments from both sides of a conversation. Rock on tigers 🤟🏾😎
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    • lyj1999
      kk
      2023-03-17
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    • Humama888
      Thank you for the discussion
      2023-03-17
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  • Blinkfans
    ·2023-03-17
    Gg//@SR050321:Before this happened always hear FED raised interest rate good for banks, i agree because bank profit from NIM, however some banks take risks buying stocks too ? Retail investors also in red, so if bank dont have holding power buy using customers money, when customers withdrawn the money all at once, bank will not have money to pay out, because they are using customer money to get more profit to pay the customer interest 😅 i really hope the bank crisis will not effect 3 SG banks, $DBS GROUP HOLDINGS LTD(D05.SI)$ $UNITED OVERSEAS BANK LIMITED(U11.SI)$ $OVERSEA-CHINESE BANKING CORP(O39.SI)$ ❤️
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    • Fly High
      FED raised intrrest rate caused by inflation which is in turn caused by govt over spendings. Now the debt limit is reached, White House asking to raise debt limit.... [Cry] [Cry] [Cry] [Facepalm] [Spurting]
      2023-03-20
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    • CherryPang
      OK
      2023-03-19
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    • 企鹅夫人
      [smile]
      2023-03-18
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  • Ah_Meng
    ·2023-03-17
    I do agree that the banking crisis will be resolved eventually. However it is the manner of resolution that is a concern. It appears yet again that central banks need to bail out big financial institutions with taxpayer's money while letting the small guys fall. Banks need to wake up or the mistake will repeat itself. Stock markets will suffered no doubt, but markets are bigger than that. The collective wisdom will stand the test of time!
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    • Ah_MengReplying todelusion梦碎
      [ShakeHands]
      2023-03-20
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    • delusion梦碎
      Yep, the government should not have intervened strongly in the first place. The most important thing now is that investors lose confidence.
      2023-03-19
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    • Ah_MengReplying toHardyJenny
      Definitely... crisis breeds opportunity... why would UBS passed it up? It just needs the government (taxpayers) guarantee that it is a winning trade for it!? A wolf crying over the death of a lamb it is eating...
      2023-03-19
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  • SR050321
    ·2023-03-17
    Before this happened always hear FED raised interest rate good for banks, i agree because bank profit from NIM, however some banks take risks buying stocks too ? Retail investors also in red, so if bank dont have holding power buy using customers money, when customers withdrawn the money all at once, bank will not have money to pay out, because they are using customer money to get more profit to pay the customer interest 😅 i really hope the bank crisis will not effect 3 SG banks, $DBS GROUP HOLDINGS LTD(D05.SI)$ $UNITED OVERSEAS BANK LIMITED(U11.SI)$ $OVERSEA-CHINESE BANKING CORP(O39.SI)$ ❤️
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  • RT126
    ·2023-03-17
    Hope that there will be a bank crisis coming and all stocks will drop and investor will soak in blood bath
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  • Dumplinggogh
    ·2023-03-17
    It's about time money undergoes revolution. Its losing value.
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  • hh488
    ·2023-03-17
    No wonder ppl resort to crypto banking rather than traditional banking?
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  • Humama888
    ·2023-03-17
    Thank fle the discussions. Appreciate your views. 👍🏻
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  • Newnew
    ·2023-03-17

    Great ariticle, would you like to share it?

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  • BernardLL
    ·2023-03-16
    The Fed is playing with fire
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  • RT126
    ·2023-03-17
    The banking control system is just too crappy
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  • Handoko
    ·2023-03-17

    Great ariticle, would you like to share it?

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  • Light Randy
    ·2023-03-16
    thanks for the info
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  • xiaobaii
    ·2023-03-17
    like & comment please
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  • boonk
    ·2023-03-16
    again.. after Lehman
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  • Goupppppppp
    ·2023-03-17
    thanks for sharing.
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  • CCYMoney
    ·2023-03-16
    Stop this nonsense
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  • Rgflow1
    ·2023-03-19
    good
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  • RKT
    ·2023-03-18
    😁
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  • Gaamy
    ·2023-03-18

    Good 

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