March 24, 2023

In 2009, he was fined by the US for helping make international transfers to countries subject to US sanctions, costing him $536 million. In 2013, the bank was fined €83 million by the EU competition commission for manipulating exchange rates. In 2014, a record $2.6 billion fine for tax evasion in the United States. In 2021, the bank got into big trouble due to the bankruptcy of fintech startup Greensill, to which it provided a $10 billion loan for business development. Also in 2021, Credit Suisse lost $5.5 billion in the bankruptcy of the Archegos fund, which invested in high-tech stocks in China and around the world but did not survive the market correction. A year later, the bank paid out $475 million in a loan fraud charge, sending Credit Suisse to multi-billion dollar losses by 2022. The icing on the cake was the bank’s recent announcement that an audit revealed “material weaknesses.” in the financial statements of previous years, which undoubtedly discouraged investors from keeping money in them. And these are only major losses, without minor problems.

Due to a succession of misadventures over several years, the bank’s shares have been falling for 15 years. At their peak, in 2007, they cost $75 per share, in 2014 – $30, now – $2.5 per share.

As you can see from this short history, the bank was certainly not in exceptional financial health. At the same time, the immediate cause of Credit Suisse’s problems today was a series of bank failures that have occurred in recent weeks in the US. The exit from the market of 3 fairly large banks, which cost the US financial system more than 300 billion dollars, raised questions from investors around the world about how trustworthy other financial companies are. The echoes of the US earthquake reverberated in France and Germany, casting doubt on the soundness of local banks, especially those already weakened by financial problems. In Switzerland, the “weak link” was Credit Suisse.

The consequences of the problems at the second largest Swiss bank must be divided into short and long term. The Swiss central bank, knowing full well the catastrophic consequences of the Credit Suisse failure, will not let it fall. If necessary, the Swiss will be pressured by the US authorities, who are also well aware of the consequences for the global financial system of the collapse of a bank that handles funds of around 1.5 trillion dollars.

The bank’s “lifeline” has already been launched: the other day it received more than 50,000 million dollars in emergency funds. As a last resort, the Swiss authorities are considering a forced merger of Credit Suisse with the largest Swiss bank, UBS. The bank can be forcibly broken up and sold to investors bit by bit, so that in the short term the rubbish can be swept under the rug. However, in the medium term, things are much worse. A series of banking problems in the United States and Europe could leave investors around the world wondering how much the investments they hold are really worth. It’s clear that many stocks tied to high-tech industries, all kinds of fintech startups, are significantly overvalued. This, in particular, is evidenced by the recent bankruptcy of the American Silicon Valley Bank, which specialized in this type of startup. There is also no confidence in the banks that invested investors’ money in US stocks, which fell in price due to the Fed’s rate hike.

All this can lead to a revaluation of the value of investments, followed by massive sales, which, in turn, can cause a global crisis. How this scenario plays out remains to be seen, but the chances of seeing a global economic downturn are quite high. It must be remembered that in 2008, several months elapsed between the Bear Stearns bankruptcy and the outbreak of the global crisis, during which investors barely dedicated themselves to such a revaluation of their portfolios and the sale of assets that had become suspect. Since then, financial processes have sped up and investors have learned from the bitter experience, so now the buildup of a critical mass from the crisis may be faster. In any case, the risks are very high. The future will show if they are implemented and, if so, in what way.

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