Credit Suisse earthquake: what is happening?
Financial markets/economy
Posted by MoneyController on 16.03.2023
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Yesterday, the second largest Swiss bank, Credit Suisse, plunged 24.2% on the stock exchange, shaking the entire banking sector and the European stock exchanges, which were already under pressure from inflation, interest rates and bank failures (in particular the bankruptcy of Silicon Valley Bank). The Stoxx index fell by 7.11%, the Dax by 3.27%, the Ftse by 3.83%, the Cac by 3.58% and the Ftsi Mib by 4.61%. How did this happen?
The news that triggered the events that followed was that Credit Suisse's largest shareholder, the Saudi National Bank (which owns 37% of the Swiss bank), would no longer support the bank if necessary. This led to the Swiss bank's biggest ever stock market fall, with its shares losing 81% of their value since March 2021. Credit Suisse now plans to borrow USD 54 billion from the Swiss National Bank.
Credit Suisse's troubles are nothing new. 2021 was a complicated year for the bank, which saw the failure of the Greensill bank and the Archegos hedge fund. The losses amounted to around USD 6 billion. After a positive year (2020), 2021 had ended with a loss of CHF 1.5 billion. Losses announced for 2022 reached CHF 7 billion, prompting S&P to downgrade the bank's rating to Bbb-.
According to financial analysts, what happened to the Swiss bank can be explained by a number of factors. Firstly, there is undoubtedly questionable management, and one only has to think of the fact that the US regulator, the SEC, even considered some of the bank's communications to be of dubious reliability. Secondly, there is the context of rising interest rates and a slowing economy, which have certainly complicated the credit market.
Meanwhile, the European Central Bank and the US Treasury Department have begun to review the exposure of banks under their supervision to Credit Suisse. The fears raised by what happened to the Swiss bank also stem from the fact that it is one of the 30 banks in the world considered "too big to fail".
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Silicon Valley Bank collapse: risk of financial crisis?
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