Credit Suisse (CS) opened down 17% at market opening on March 15th. Roughly 30% over the course of a week and a staggering 96.7% down from its all-time high. I have to credit Twitter user Douglas A. Boneparth with the title after he tweeted the statement earlier in the same day.
Credit Suisse is facing a variety of problems in the market today, the scope of which cannot currently be realised. After the recent collapse and closure of three banks in the US, two of which mark some of the biggest bank failures in US history, there has been a fair share of panic throughout the investment world.
The nature of Credit Suisse’s stock falling has led to widespread shock felt throughout Europe’s banking industry. Europe’s major banks opened on a negative today with many falling in the hours prior to CS opening. French banks experienced sharp drops in the value of their stocks after fears of contagion from Credit Suisse’s troubles.
The EU financial services chief stated that the recent collapse of Silicon Valley Bank has had a limited impact on the EU markets. However, as the Guardian reports John Leiper of Titan Asset Management has argued that the “ripple effects” from the SVB collapse will continue to be felt across the sector. It is unknown to what degree certain institutions had ties to SVB and the reality is these problems will only be revealed through time, everything else is baseless speculation.
The implications of impending bailouts continue to worry many and Peter Schiff has continuously commented on the negative impact bailouts will have on the capitalist economic system. Schiff, a financial commentator and stock broker, has argued that continued bailouts will essentially nationalise the US banking system and therefore undermine the very nature of capitalism.
Back with Credit Suisse, the lender has alleged they have material weaknesses in their financial controls. This comes alongside their principal shareholder, the Saudi National Bank, stating that they will be unable to financially support the lender through their troubles. Additionally, they cannot increase their 10% stake in the lender. The Telegraph reported that these issues accumulated to send the Credit Suisse stock “tumbling” on the morning of March 15th.
The continued issues brought Larry Fink into the equation. Fink, the CEO of BlackRock, argued that we are experiencing the beginning of a “slow-rolling crisis” and that there will be more “seizures and shutdowns incoming”. Others were more optimistic, one of these being Michael Burry. Burry, who founded Scion Capital and was one of the first to predict the Subprime Mortgage Crisis in 2008, referenced a stand that JPMorgan made to stop the Panic of 1907 and alleged that a “stand” had been made this weekend.
Despite this, I would hedge it is too early to predict the outcome of the current banking situation. The US Treasury announced that it is in touch with its global counterparts and is “monitoring the Credit Suisse situation.” The safest option would be to wait with bated breath for a more official diagnosis of the situation or something much harder to miss, like a complete and catastrophic economic collapse.
For any further information and a live feed of the news and commentary on the Credit Suisse situation, the Guardian has a feed being updated frequently with all relevant information here.
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