Credit Swiss Bank Struggles Amid Global Market Volatility

Credit Suisse Bank has been facing significant challenges in recent times, largely due to global market volatility. The bank has struggled to maintain its profitability, with its net income declining by 23% in 2022.

The bank's struggles are partly attributed to the decline in its investment banking business, which saw a 15% drop in revenue. This decline has had a ripple effect on the bank's overall performance.

Credit Suisse has been trying to diversify its business and reduce its reliance on investment banking. However, this effort has been slow to yield results, and the bank still faces significant headwinds.

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Credit Suisse's shares plunged over 30% to a record low of about 1.56 Swiss francs (£1.40) a share after its top shareholder, the Saudi National Bank, ruled out providing fresh funding due to regulations capping its stake at 10%.

The bank's reputation was damaged by an accounting scandal at Luckin Coffee, where Credit Suisse acted as an underwriter when the company went public on the Nasdaq in 2019.

Credit Suisse is a global systemically important bank, one of just 30 institutions categorized by the Financial Stability Board, and is deemed a much bigger concern for the global economy than regional US banks.

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Credit Suisse's shares plummeted over 30% to a record low after Saudi National Bank, its top shareholder, ruled out providing fresh funding due to regulations capping its stake at 10%. This sparked panic among investors.

The bank had already raised 4 billion Swiss francs in autumn last year to fund a major restructuring plan, and its chairman, Ammar Al Khudairy, insisted it was "a very strong bank" unlikely to need more cash. However, his comments only seemed to exacerbate the situation.

Credit Suisse is Europe's 17th largest lender by assets and is considered systemically important to the global financial system. This makes its struggles particularly concerning.

The bank's woes have been compounded by the collapse of Silicon Valley Bank (SVB) and ongoing issues at Credit Suisse, leaving investors fearing potential weaknesses across the global banking sector.

Credit Suisse has been struggling for decades, making it a slow-moving car wreck. The bank's problems are very different from those that led to the collapse of Silicon Valley Bank.

The trigger for Credit Suisse's recent share price rout was not rising interest rates, but rather comments from its biggest backer, the Saudi National Bank. The Saudi National Bank said it wasn't prepared to put up more money after buying a near-10% stake for $1.5 billion last year.

Fears about weaker lenders exploded after Silicon Valley Bank collapsed in the biggest US banking failure since the 2008 financial crisis. This collapse engulfed other banks facing big problems, including Credit Suisse.

Credit Suisse's shares plummeted over 30% on Wednesday to a record low of about 1.56 Swiss francs after its top shareholder, the Saudi National Bank, ruled out providing fresh funding due to regulations capping its stake.

The bank's reputation was damaged by an accounting scandal at Luckin Coffee, where Credit Suisse acted as an underwriter when the company went public on the Nasdaq in 2019, only to be pulled off the US exchange after it was found to have fraudulently inflated sales.

Credit Suisse is a global systemically important bank, categorized by the Financial Stability Board as one of 30 such institutions worldwide, alongside JPMorgan Chase, Bank of America, and the Bank of China.

The bank's size and interconnectedness make it a global concern, not just a Swiss problem, with a reputation that's now vulnerable due to past accounting scandals.

Credit Suisse has a long history of operating in a complex regulatory environment. The bank has been subject to various regulations and guidelines set by the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank.

In 2015, Credit Suisse was fined $2.6 billion by the US Department of Justice for helping American clients evade taxes. This settlement was the result of a comprehensive review of the bank's activities by the US government.

The bank has also been involved in various other regulatory issues, including a 2016 settlement with the US Department of Justice and the Securities and Exchange Commission (SEC) over the bank's role in the manipulation of the London Interbank Offered Rate (Libor).

Credit Suisse has a dedicated compliance team that works to ensure the bank is meeting all regulatory requirements.

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Credit Suisse has a long history dating back to 1856, and it has grown into one of the largest financial institutions in the world. With a presence in over 50 countries, it's no surprise that the bank has become a major player in the global financial market.

The bank's focus on wealth management and investment banking has led to significant growth in these areas, with Credit Suisse's wealth management business generating over $10 billion in revenue in 2020. This is a testament to the bank's ability to adapt to changing market conditions and capitalize on opportunities.

Despite facing challenges in recent years, Credit Suisse remains a strong and stable institution, with a solid balance sheet and a reputation for excellence in the financial industry.

Credit Suisse's problems have been building up over the past decade, with a long list of scandals involving alleged misconduct, sanctions busting, money laundering, and tax evasion.

The bank's issues have been compounded by its involvement in the Mozambique "tuna bonds" loan scandal, which resulted in a fine worth over £350m.

Credit Suisse has also been caught in corporate espionage, admitting to defrauding investors, and being embroiled in the collapse of the lender Greensill Capital and the US hedge fund Archegos Capital in 2021.

The bank's problems have not been limited to financial issues, but also involve its involvement in serious crimes such as torture, drug trafficking, and corruption over decades.

In 2022, Swiss prosecutors found the bank guilty of helping to launder money on behalf of the Bulgarian mafia, although the bank has denied wrongdoing and intends to appeal against the ruling.

These scandals have led to significant financial losses, with the bank's losses ballooning to 7.3bn Swiss francs (£6.6bn) in 2022.

Credit Suisse's problems have been exacerbated by its inability to effectively manage its internal controls, with the bank admitting to "material weaknesses" in its financial reporting.

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Credit Suisse's future is uncertain, and it may not be out of the woods yet. The Swiss National Bank's lifeline could buy time for the bank to restore confidence and push on with restructuring plans.

Carving out investment banking into an independent US-based business and focusing on Switzerland, as well as managing money for wealthy clients, are part of Credit Suisse's plans. However, these efforts may not be enough.

JPMorgan's banking analysts believe that the liquidity support offered by the Swiss central bank is insufficient, given ongoing market confidence issues with Credit Suisse's investment banking plans. The erosion of the bank's franchise is also a concern.

A takeover by a bigger Swiss rival, most likely UBS, is seen as the most likely endgame by JPMorgan's analysts.