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Credit Suisse At Gunpoint. Will There Be a Shot?

Credit Suisse
Credit Suisse. Source:

This was a challenging week for Credit Suisse’s top managers and its public relations department: they had to deal with media attacks on their financial standing that predicted a coming collapse for the bank. Now, the media seems to be divided on this issue.

It is hard to say how exactly it all started. We know for sure that on Saturday an ABC journalist tweeted that Credit Suisse was "on the brink" (now the post is deleted and the journalist is revising the employer's social media guidelines). His post, however, wasn't completely groundless.

Credit Suisse, the second-biggest bank in Switzerland, has been going through tough times lately. A year ago, Archegos Capital, a US registered family office, collapsed, which resulted in $4.7 billion losses for Credit Suisse due to the default of Archegos Capital Management on margin requirements. A year before that the CEO of the bank had to resign after a series of spying scandals, when it turned out that the bank was spying on its former employers and top managers. As for the recent failures, at the beginning of this year the Guardian newspaper published an investigation that revealed over $100 billion held by people who had profited from “torture, drug trafficking, money laundering, corruption and other serious crimes.” There were other irregularities that damaged the reputation of the bank and added to estimated losses, but let's no more dwell on it. So what has triggered things now?

The last straw might have been the fact that insurance against default on several banks rose in price. As a result when the price of insurance goes up, it gives investors a reason to panic. And with Credit Suisse in turbulence lately, it has taken a hit. Some say, Credit Suisse is going to be the next Lehman Brothers.

Major media outlets, oppose speculation and defend the Swiss bank. Bloomberg, for example, points out worsening market conditions for all players amid higher inflation, increasing risks and costs. However, they reassure the markets that Credit Suisse has enough capital to run the business even under such circumstances. JP Morgan analysts also noted they view Credit Suisse's capital and liquidity as "healthy".

Still, the stock price fell sharply and is now hovering around its all-time-low. The current CEO of Credit Suisse admits it is a challenging period and promises to introduce transformation plans before October 27th.

Do you believe their new strategy will rectify the situation or are you getting ready for the next global financial crisis?