by Michael Snyder, The Economic Collapse Blog:
Do you remember when wealthy people all over the world would stash their money in Swiss banks because there were so strong and so private? Well, the second largest bank in Switzerland is literally on the brink of collapse. As I discussed yesterday, Credit Suisse is a prime candidate to be one of the next dominoes to fall. It has been on very shaky ground for a long time, and now the global banking panic has greatly accelerated the outflow of assets from the bank. So why should you care if it fails? Unlike Silicon Valley Bank and Signature Bank, Credit Suisse is so critical to the worldwide banking system that it has officially been designated “as being systemically important by the international Financial Stability Board”…
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Credit Suisse is one of just 30 global financial institutions designated as being systemically important by the international Financial Stability Board. In other words, it’s too big to fail.
A “too big to fail” bank has not collapsed in more than a decade.
If Credit Suisse does go under, the shockwaves will reverberate all over the planet. Even though Credit Suisse is now smaller than it once was, it is still vastly larger than SVB…
Credit Suisse had total assets of $574 billion at the end of 2022 — down 37% from $912 billion at the end of 2020. Its asset-management arm supervises another $1.7 trillion in assets. Those numbers dwarf anything seen at Silicon Valley Bank, which had total assets of $212 billion.
So let us hope that Credit Suisse can be stabilized, because the alternative would be a complete and total nightmare.
Just like SVB, one of the reasons why Credit Suisse is in so much trouble is because it loaded up on government bonds that have now gone down in price dramatically…
The balance-sheet problems that took down SVB are probably even bigger at Credit Suisse. While SVB bought mortgage bonds at 1.5% yields, big European banks were forced to buy sovereign debt at sharply negative yields.
At this point, large European banks are holding mountains of such bonds, and that is truly an existential threat to the entire European banking system.
Unless emergency measures are implemented, a whole bunch of these institutions will inevitably implode.
As for Credit Suisse, the stock price hit yet another brand new all-time record low on Wednesday…
Shares of Credit Suisse on Wednesday plunged to a fresh all-time low for the second consecutive day after a top investor in the embattled Swiss bank said it would not be able to provide any more cash due to regulatory restrictions.
Trading in the bank’s plummeting stock was halted several times throughout the morning as it fell below 2 Swiss francs ($2.17) for the first time.
There had been hope that Saudi National Bank would come riding to the rescue, but those running Saudi National Bank have ruled that out…
The fresh losses came after the chairman of the bank’s top shareholder, Saudi National Bank, ruled out investing any more into the bank in a Bloomberg interview on Wednesday. The Saudi bank has just under a 10% stake in Credit Suisse, and crossing that threshold would subject it to new rules.
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