The scandal-ridden Swiss bank Credit Suisse has been in trouble for a long time. Large parts of the equity have disappeared, especially in the last two years. The share price has plummeted, and confidence in the bank has crumbled. Many of the depositors have withdrawn their money. The bank has tried to entice customers to stay with high deposit interest rates. Postponed annual report caused unrest On 9 March this year, news broke that the company had postponed the publication of its annual report after the Financial Supervisory Authority in the USA questioned previous financial reports. Such news is rarely well received in the financial markets. The share price fell sharply. The price drop continued this week, when the annual report was published. There, the company said that a review had revealed major weaknesses in previous financial reporting. The timing of the news of weak financial reporting from Credit Suisse could hardly have been worse. A few days earlier, the news came that several American banks, including Silicon Valley Bank, had failed. The problem: The bank ran out of money, and had to sell assets that had fallen in value as many customers withdrew their deposits. The authorities took over Silicon Valley Bank. New bank in trouble Now the analysts were looking for other banks in trouble. And found it in Europe and Credit Suisse. Storbanken really came under the spotlight on Wednesday after the largest owner said that they would not or could not contribute more money. The Swiss central bank intervened with a financial lifeline for the big bank. On Thursday, the share price in Credit Suisse rose sharply, after the value of the bank fell by more than a quarter yesterday. The big bank Credit Suisse really came under the spotlight on Wednesday after the largest owner said that they would not or could not contribute more money. Photo: SPENCER PLATT / AFP Scandals in line The bank with roots dating back to the 1850s has lost money in the last couple of years. Among other things, the bank lost the equivalent of NOK 60 billion on the collapse of the hedge fund Archegos a couple of years ago. Employees were fired and bonuses had to be repaid. Confidence in the bank has been frayed. The bank was convicted last year in a case of laundering Bulgarian drug money, and said then that the verdict would be appealed. The court found that the bank had accepted deposits which should have caused all red lights to light up at the same time. The consequence was fines equivalent to a few hundred million Norwegian kroner. Axel Lehmann has been chairman of Credit Suisse since last year, and has enough to do with keeping the bank afloat. Photo: FABRICE COFFRINI / AFP A large data leak during last year exposed thousands of the bank’s clients. Among them many dubious ones, who normally stay far away from the public spotlight. During 2022, the bank got both a new CEO and chairman of the board. A question of trust The fundamental problem for banking operations has been that many depositors have not had trust in the bank, and have withdrawn their money. The effect has been reinforced by the war in Ukraine, and investors from Asia, among others, are said to have stayed away for fear that their deposits could be frozen or confiscated. As recently as February this year, Swiss authorities said confiscation of Russian assets in Switzerland was against the country’s constitution and legal rules, after billions of dollars were frozen before the New Year. Banking is completely dependent on trust, and the worst thing that can happen to a bank is that too many people want to withdraw their money at the same time. Bank run can mean ruin Then you can get what was called a “bank run”. The consequence may be that the bank has to sell assets to cover its obligations, as far as possible. In many countries, bank deposits up to a certain amount are covered by government deposit guarantees. In the EU, deposits up to EUR 100,000 are covered by the guarantee, compared to NOK 2 million in Norway (via the bank’s guarantee fund). In the USA, deposits up to 250,000 dollars are covered by a deposit guarantee. The special thing about the behavior of the US authorities when Silicon Valley Bank was taken over by the state was that the state practically guaranteed all deposits. Also those who were not covered by the deposit guarantee. To ensure confidence in the system. At the end of 2022, the Government’s pension fund abroad owned shares in Credit Suisse Financial Group for NOK 1.5 billion, corresponding to a 1.5 percent stake in the bank. At the same time, the fund owned corporate bonds (loans) in Credit Suisse corresponding to a scant NOK 1.4 billion.
ttn-69
This is how Credit Suisse got into trouble – news Urix – Foreign news and documentaries
