China Fund News Taylor
Hello everyone, how are you doing the National Day holiday? Today, Taylor saw a big news that the century-old investment bank Credit Suisse may go bankrupt. . .
rumored that large investment banks exploded
market guessed it was the century-old banking giant Credit Suisse
Recently, a message was circulating 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. One of the things that attracted attention is Credit Suisse
Credit Suisse has been troubled by a series of scandals in recent years, including Archegos' liquidation, Greensill bankruptcy, and leaks, which has 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.
In addition, according to Bloomberg data, 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. The higher the price of CDS defaults swap , the greater the probability of default.
Credit Suisse CEO Kornar acknowledged in a second memorandum to employees in a few weeks that there were many uncertainties and speculations within and outside the bank, but called on employees not to confuse their daily stock price performance with the company's "strong capital base and liquidity status." However, Lehman Brothers also said similarly before going bankrupt.
Korna said that it was unable to share details of the transformation plan by October 27, but said it would send the latest news to employees regularly until the results of the daily strategic assessment came out, requiring employees to remain disciplined and keep in close contact with customers.
Previously, media reported that Credit Suisse has formulated a plan to split its investment banking business into three parts, namely the consulting business, which may be divested at some point in the future; bad debt banks hold high-risk assets that will be gradually liquidated; and other businesses. Credit Suisse hopes to become a "capital light" investment bank focusing on wealth management and banking business again.
According to the proposal submitted to the bank's board of directors, Credit Suisse hopes to sell profitable departments such as securitization product business, hoping to avoid damage to financing capabilities. The securitization product business packages debts such as mortgages and then sells them as securities, which will reduce the bank's capital liabilities, but will also make it lose one of its most profitable businesses.
What happened to Credit Suisse?
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. In addition, Credit Suisse was convicted in a lawsuit allegedly helping drug dealers launder money, becoming the first large bank in Swiss history to be found guilty in a criminal case.
Last year, Archegos' high-leverage bets on several stocks crashed, shocking Wall Street and triggering an investigation by regulators, and Credit Suisse took most of the losses. These losses have put Credit Suisse in its worst year since the financial crisis, prompting major management adjustments and reorganizing the board.
The fund said that Credit Suisse suffered $5.5 billion in losses due to "failure to adopt and implement basic modern risk management structures and processes, not to mention the widespread damage to its reputation and goodwill" due to "failure to adopt and implement basic modern risk management structures and processes." Credit Suisse executives even learned about Credit Suisse’s exposure to the fund a few days before Archegos was forced to close.
Before Archegos' stock price fluctuated, Credit Suisse had doubled due to the collapse of supply chain finance company Greensill. After Greensill declared bankruptcy in March 2021, it closed its $10 billion supply chain finance fund holding Greensill bonds and rectified its asset management department. Credit Suisse previously stated that as of the end of 2021, it had submitted five insurance claims to Greensill, corresponding to Credit Suisse asset management risk exposure of approximately US$1.2 billion.
