1. Is Credit Suisse going bankrupt?
According to China Fund News, a message is spreading wildly in the foreign market. David Taylor, a business reporter under Australian Broadcasting Corporation (ABC), reported according to "Reliable News" that a large investment bank is on the verge of bankruptcy. The spread of
has caused heated discussion in the financial industry, and one of the ones attracted attention is Credit Suisse. Credit Suisse has been plagued by a series of scandals in recent years, including Archegos' liquidation, Greensill bankruptcy, and leaks, which have damaged the company's reputation and dragged down its performance. Its stock price has been in a slump since February last year, falling from $14.90 to $3.92 at the close of Friday.
Credit Suisse's credit default swap index climbed to 250 basis points on Friday, approaching the level when Lehman Brothers went bankrupt in 2008, attracting market attention. CDS default swap price, the higher the default probability. Credit Suisse CEO Kornar acknowledged a lot of uncertainty and speculation inside and outside the bank, but called on employees not to confuse daily stock price performance with the company's "strong capital base and liquidity status." However, Lehman Brothers also said similarly before going bankrupt.
In 2021, Credit Suisse suffered a "double critical hit" from ArchegosCapital's liquidation and GreensillCapital's collapse, causing the company to suffer billions of dollars in losses, forcing its investment banking supervisor and chief risk officer to leave.
2. What's wrong with Credit Suisse?
We see that the world-renowned century-old investment bank is facing a serious crisis. Many people are asking what is going on? Why is a bank as big as Credit Suisse in such a serious crisis? How should we analyze and judge?
First of all, whether it is the previous Lehman Brothers, the earlier , Bahrain Bank , and now Credit Suisse, these famous internationally renowned investment banks actually have relatively big problems. This is because their business is actually highly contagious and conductive. No matter what kind of business development it is, there may be a certain market spread trend. Once this market spread trend is difficult to effectively curb, the risks will be quickly transmitted within the bank. Therefore, the core key of banks like Credit Suisse is actually what kind of market risks are in the development of their own business, and how should they analyze it.
Secondly, let's take a closer look at the current problems that Credit Suisse has actually had major problems in many projects, including the liquidation and investment bankruptcy we have seen before, as well as the entire leak, including the series of problems such as Credit Suisse being involved in the money laundering scandal, etc., which has led to the huge market pressure in the market. The distrust of market investors in the market has reached a new level. Under such a background, it becomes very normal for Credit Suisse to have problems. As long as Credit Suisse does not receive effective market support in this regard, it is very likely that there will be relatively large market problems, and each of these problems will suffer billions of dollars in losses to Credit Suisse. Under such a broad background, no matter how big a company is, it may be difficult for it to support its development.
Third, for these internationally renowned investment banks, the biggest problem actually comes not only from their own losses, but also from problems in the market. When the market's trustworthiness is under relatively high pressure, these banks will experience overall systemic risks. Moreover, once there is a serious problem with the market's trust level, the trust crisis may turn into a market run crisis. Of course, the deposit business of investment banks like Credit Suisse will not occupy a relatively large level, but this state of distrust will seriously affect the company's stock price. The final result will lead to the rapid shrinking of the financing capacity of the entire market, which will be a huge blow to an investment bank.
