Rumors about the fall of Credit Suisse panic the markets


In Bern (Switzerland), August 15, 2022.

A share of the Credit Suisse banking group is worth less than a coffee in Zurich, where it is certainly not cheap. The mockery that circulated Monday, October 3 on the financial markets had the bitter scent of intuitions preceding the great catastrophes. The bank, Switzerland’s number two, and one of the heavyweights in the sector worldwide, would be very close to defeat. A disaster scenario, a kind of remake of the Lehman Brothers crash in 2008 on Wall Street, which led to an international financial crisis.

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” Is it possible ? »asked Ipek Ozkardeskaya, an analyst at Swissquote, in a market note. “Yes, it is possible, but highly unlikely”, because the bank would still be well capitalized. Nevertheless, nothing seems to stop the rumor, this plague of the markets, where we already designate Credit Suisse under the unfavorable name of “Debit Suisse”.

Internal message

At the close of trading on Monday, the stock was worth only 3.94 Swiss francs (4.06 euros), down 57% since the start of the year. Credit Suisse’s market capitalization is no more than 10 billion Swiss francs, a trifle at this level. At the end of the previous week, a whole series of indices seemed to confirm the possibility of an imminent “default” of the establishment, starting with the surge in the prices of its credit default swaps (CDS), these derivative products which allow their issuer to protect themselves from a possible default. They have reached levels not seen since the last financial crisis in recent days.

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Terrified by the speed with which the rumor spread, the new CEO, Ulrich Körner, called in reinforcement during the summer, beat the recall of the troops. In an internal message on Friday, he urged employees not to panic, while top executives called on institutional clients and investors to avoid an investment haemorrhage. But it was not enough. As often in this kind of case, hedge funds would also be at work, selling Credit Suisse shares short for weeks to take advantage of the collapse of the stock market price.

The bank would still be protected by its too-big-to-fail status

It must be said that the markets, never very sentimental, have sniffed out an ideal prey. Bloodless, Credit Suisse has been trying for many months to restore a reputation ravaged by repeated scandals. By bad luck, or more prosaically by excessive risk-taking, the bank has been burnt in many sulphurous deals in recent years that have cost it billions: implosion of hedge funds Archegos and Greensill Capital; Mozambican junk bond case; money laundering by the Bulgarian mafia punished by the Swiss Supreme Court; not to mention the sordid cases of internal espionage between senior executives in the recent era of CEO Tidjane Thiam. And as if this dark novel of bad practices were not enough, a consortium of international newspapers (including The world) revealed in February in “Suisse Secrets”, a data leak, how much Credit Suisse had been involved in a number of dubious cases.

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