On its way to the largest annual decline since its inception, the bank's shares fell on Monday morning, reaching a new low of $3.70 per share, while its shares recorded a decline of nearly 60% this year.
Concerns about the financial health of Swiss banking giant Credit Suisse over the weekend led to fresh market fears of another crash similar to that of Lehman Brothers in 2008.
Forbes magazine indicated in a report published on Monday that rumors that the capital position of Credit Suisse Bank is in great danger began to abound in conjunction with the decline in shares to new lows and the high cost of insuring the bank against default to its highest level in more than two decades.
On its way to the largest annual decline since its inception, the bank's shares fell on Monday morning, reaching a new low of $3.70 per share, while its shares recorded a decline of nearly 60% this year.
Despite the rise in bank credit default swaps, which provide protection against default, Wall Street experts are currently rejecting the idea of another explosion of the type of the Great Recession to shake the entire financial system, and say that it is unlikely For Credit Suisse to fail and repeat the Lehman Brothers scenario.
The reason behind the panic wave
According to the Financial Times , Credit Suisse has spent the past few days fighting social media rumors about the strength of its balance sheet, and trying to convince investors and clients that falling stock prices and skyrocketing credit default swaps don't tell the true story of the bank's health.
The rumor of the collapse started from Twitter, after people such as Spencer Jacob, president of the Wall Street Journal, and many critics posted tweets that sparked anxiety and panic among investors, after a note last Friday issued by the CEO of Credit Suisse Ulrich Korner, to inform employees that “today The bank's daily stock price performance should not be confused with a strong capital base and liquidity position.
The bank's recent moves follow a sharp rise in credit default swaps, a measure of investor sentiment about risk, which has jumped more than 50 basis points over the past two weeks, to 250 basis points on Friday, according to Swiss Info .
The recent wave of panic may have escalated due to the name of the Swiss bank being linked to corruption, money laundering and receiving deposits from corrupt rulers around the world in recent years, which made it subject to fines by the international judiciary. And last February, the name of the bank was again linked to the scandal of leaking customer data that caused a global uproar, according to the British newspaper The Guardian .
rescue plan
Swiss bank executives, who spent the weekend reassuring big clients and investors about liquidity and capital position, had failed in the task of calming turbulent markets, the Financial Times said in a report published on Tuesday. By Monday, traders and investors were quick to sell shares and bonds . Credit Suisse while buying credit swap bonds.
The newspaper cited Deutsche Bank analysts' estimates last month that the crackdown would leave the Swiss lender in need of an additional CHF4 billion due to restructuring costs, the need to grow other business lines and regulatory pressure to boost capital ratios.
The bank, which has suffered heavy losses this year, is planning to sell parts of its investment bank, likely including its prized securitized products business, which analysts said could raise up to CHF2 billion. He announced that he will reveal the results of his restructuring plan on October 27, according to Bloomberg G.
Are we witnessing a new economic collapse?
The sudden bankruptcy of Lehman Brothers, the most famous bank in the United States, in September 2008, plunged the world into the worst economic crisis since the 1930s. This was the largest bankruptcy in American history, as the "Dow Jones" index fell 500 points in the strongest decline since the attacks of September 11, 2001.
In fact, this is not the first time that the bank, founded by Swiss businessman and politician Alfred Escher in 1856 and credited with the development of industry in Switzerland, has been in trouble. But the crises and stumbles experienced by the global economy as a result of the Ukrainian war, high interest rates and repeated warnings of an upcoming recession have exacerbated the fears it is facing about its future.
Despite the cloud of uncertainty hanging over the second largest Swiss bank, the Financial Times quoted some as saying that "Credit Suisse" may be "the worst big bank in Europe" but it is not on the verge of collapse. While the king of CDS and founder of Saba Capital Management Boaz Weinstein believes that the horror story that attempts to link the problem of the Swiss bank with the problem of the US bank that caused the financial crisis in 2008 is not at all close to the truth.
When asked, " Is it another Lehman Brothers? " Bloomberg's Paul J. Davies said so, too. Charlie Gasparino of Fox Business said the mood among top bankers is that the situation is "not as dire" as speculation might imagine.
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