Credit Suisse, the 167-year-old bank and the second-largest lender in Switzerland is in turmoil. According to sources, the bank would borrow up to 50 billion Swiss Francs from the Swiss National Bank. The bank also said that it would buy back some of its own debt, after its stock crashed by as much as 30%.
Fears are spreading, as last week Silicon Valley Bank and signature bank in the United states collapsed. Both investors and markets are on the edge of danger as there is instability in the global market.
Why is Credit Suisse in trouble ?
Credit Suisse shares drop to a record low for two major reasons. The bank claims it has found ‘’material weaknesses’’ in its financial reporting. Furthermore, investors are not willing to buy the shares to support the bank.
Saudi National Bank is one of the largest shareholders which has 9.88 percent stake in Credit Suisse. Due to regulatory issues they can not buy stakes greater than 10 percent. Andrew Kenningham at Capital Economics said, ‘’“Credit Suisse is in principle a much bigger concern for the global economy than the regional US banks which were in the firing line last week.Credit Suisse is much more globally interconnected … not just a Swiss problem but a global one.”
In the past, the bank has experienced a series of missteps and compliance failures.It has several overhauls of top management and led to costs millions. It has been hit with fines and penalties related to tax evasion and other issues.
Most likely by bigger Swiss rival UBS
JPMorgan’s banking analysts said,“In our view, status quo is no longer an option as counterparty concerns are starting to emerge as reflected by credit/equity markets weakness,” they wrote in a research note Thursday, adding that a takeover — most likely by bigger Swiss rival UBS — was the most likely endgame.
The global changes are likely to affect Australian banks in view of the current scenario. However, Professor Fariborz Moshirian, a global financial stability expert from the University of New South Wales says,
“At this stage there is no need for any concern about the Australian banking system and its resilience,”
“The Australian banks are well-capitalized, have access to liquidity and have strong balance sheets.”
