The Destruction of Credit Suisse - The Darkest Moment of a Century-old Investment Bank
Time： 2023-03-24 13:43
1. Credit Suisse planted huge risks in 2021, and "natural disasters" and "man-made disasters" followed one after another
1. In early March 2021, the British Greensill Financial Company went bankrupt, causing huge losses to Credit Suisse.
Greensill is engaged in supply chain financing. It found that the receivables in the supply chain generally have the problem of delayed payment, so it securitized the advance payment paid by the enterprise, packaged them into bonds and sold them to third-party financial institutions, so as to obtain higher income. income. Credit Suisse is the largest buyer of this bond.
Before the epidemic, Greensill developed smoothly, but the arrival of the new crown epidemic strongly impacted the global supply chain system, causing Greensill to go bankrupt. Credit Suisse previously invested $10 billion in bonds issued by Greensill, so it lost a lot.
2. At the end of March 2021, Archegos liquidated its position, which brought huge losses to Credit Suisse.
At the end of March 2021, Archegos, a family office managed by hedge fund manager Bill Hwang, made highly leveraged bets on stocks, and the stocks crashed, with a single-day loss exceeding tens of billions of dollars.
Affected by the Archegos liquidation incident, Credit Suisse, as the bank with the most serious losses, lost 4.7 billion US dollars, and its reputation and goodwill were both deeply damaged.
3. Since 2022, the surge in Credit Suisse CDS suggests that risks have begun to erupt.
Since 2022, the CDS (five-year credit default swap) of the hit Credit Suisse Bank has skyrocketed. The role of CDS is similar to an insurance contract. The higher the basis point of CDS, the greater the risk of the company's insolvency.
2. On March 15, Credit Suisse’s share price plummeted, bringing down a series of bank stocks
1. Reason 1: self-disclosure of major flaws in the financial report
On March 14, Credit Suisse Group not only released its worst annual report since 2008, but also revealed that it had found "major flaws" in the reporting process for the 2022 and 2021 fiscal years.
In its annual report, Credit Suisse revealed that "the group's internal control over financial reporting is ineffective (material weakness)" because it failed to adequately identify potential risks to financial statements. "Material deficiency" means the failure to design and maintain an effective risk assessment to identify and analyze the risks of material misstatement in the financial statements, and management's failure to design and maintain effective controls over the classification and presentation of the statement of cash flows.
Credit Suisse said at the time it was urgently developing a "remedial plan" to fix "significant deficiencies". Chairman Axel Lehmann has proposed a "voluntary waiver" of share awards worth CHF 1.5 million for the 2022-2023 fiscal year. Credit Suisse has cut the capital pool for all employees by about half in 2022.
2. Reason 2: The largest shareholder refuses to provide any financial assistance
After the earnings report, Credit Suisse's largest shareholder, the National Bank of Saudi Arabia, refused to provide it with more funds to tide it over. Ammar Al Khudairy, chairman of the National Bank of Saudi Arabia, said: "There will be absolutely no further liquidity support to Credit Suisse." The National Bank of Saudi Arabia is already the largest shareholder. Additional regulatory hurdles.
3. The last moment on March 19 - UBS will acquire Credit Suisse for 3 billion Swiss francs
The acquisition arrangement is enforced under the full push of the Swiss government and the central bank, and does not require the approval of various shareholders, thereby mitigating the huge and uncertain financial risks. A financial institution with assets exceeding one trillion U.S. dollars was acquired by more than three billion U.S. dollars.
The most appropriate description for this acquisition is an arranged marriage, where the bride and groom were reluctant, and the elders intervened forcefully and promised to provide sufficient funds. The Swiss National Bank said it could provide up to 100 billion Swiss francs in liquidity assistance loans to Credit Suisse.
Compared with the financial crisis in 2008, whether it is the United States or Switzerland, the governments and central banks of all countries are extremely fast. However, the flood of breaching dikes penetrates everywhere, breaking through from the weakest link. Although the failure of each bank is not universal on the surface, the subtle and rational correlation in the financial market may bring huge waves.