Finance & Economics

Credit Suisse Reveals Scale of Bank’s Bankruptcy

Credit Suisse has revealed the extent of the bankruptcy of this financial institution.

Credit Suisse Reveals Scale of Bank's Bankruptcy

Source: Pixabay.com

The Swiss banking giant reported that during the first three months of this year, funds in the amount of 61.2 billion Swiss francs ($68.6 billion) were withdrawn from accounts opened in this financial institution. The active outflow of funds began after the bank announced that it was nearing the end of its history.

The forced sale of a financial institution to a rival Swiss bank UBS, according to media reports, will be completed shortly. At the end of March, the assets of Credit Suisse’s leading division, which specializes in capital management activities, decreased to 502.5 billion francs (564.9 billion dollars). This figure is 29% lower than the volume recorded a year earlier.

The outflow of funds slowed down in April, but there is still no reason to talk about a radical change in the situation and the return of assets.

Credit Suisse clients were partially motivated by market turmoil, which resulted from the collapses of Silicon Valley Bank and Signature Bank in the United States in March of this year when making decisions about withdrawing money.

The Swiss authorities have prepared a set of measures to rescue the giant of the country’s banking sector. These measures, among other things, provided financial guarantees for more than 200 billion francs (about 225 billion dollars). The actions of the authorities gradually led to an agreement on the part of UBS to acquire the bank.

Over the past few years, Credit Suisse has been unprofitable. Also, the financial institution faced problems of a different nature, For example, accusations of involvement in money laundering activities were voiced against the bank.

By the end of 2022, the losses of the financial institution amounted to 7.3 billion francs (8.2 billion dollars). The bank also previously stated that there were no expectations of profitability by the end of 2023.

Francis Coppola, an independent banking analyst, says that Credit Suisse has recorded an outflow of money in the last three months of 2022. He noted that last year’s outflow, combined with the active withdrawal of funds at the beginning of this year, is a situation that no bank can survive, regardless of its size.

Shanti Kelemen, investment director at M&G Wealth Investments, said that for Credit Suisse, the ratio of remaining assets to funds withdrawn by customers indicates an imbalance not in favor of the financial institution.

The bankruptcy of Silicon Valley Bank and Signature Bank provoked a drop in the shares of banking companies amid fears that the collapse will become a stable trend on a massive scale, which will affect many other representatives of this sector. For Credit Suisse, this was the strongest blow in a series of other problems and shocks.

Swiss prosecutors have launched an investigation into the takeover of Credit Suisse, which was the country’s second-largest bank. The relevant transaction caused a negative reaction from taxpayers and shareholders, who were deprived of the right to vote in this situation. There were also statements that the takeover harms Switzerland’s reputation as a global financial center. The preliminary value of the transaction is about 7 billion francs (approximately $ 8 billion).

As we have reported earlier, Credit Suisse to Borrow Up to $54bn from Swiss Central Bank.

 

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.