One of the oldest financial institutions in the world, Credit Suisse has a turnover of $22.65 billion, and is the second-largest bank within the Swiss banking system. It provides a wide range of financial services through its two main private and investment banking divisions.
The banking giant has recently come into the spotlight after a massive plummeting of stock value as a consequence of investing in broken hedge funds, as well as its top management facing allegations of being involved in scandals and irregular international banking practices.
Concerns are being raised about the overall stability of the firm and a number of analysts now point to the sequence of events being similar to the Lehman Brothers collapse of 2008, fearing the beginning of another global financial recession.
Why Credit Suisse?
While its private banking division provides services such as wealth management, financial markets expertise, investment banking solutions, and access to a wide network of high-value contacts, its investment banking section offers curated investment solutions for clients. The bank claims to have more than 3,800 relationship managers spread across 50 countries.
The investment banking division comprises four service sectors. The global markets arm presents a plethora of financial products and services customized for clients. They also assist international wealth management businesses in handling their customers.
The investment banking and capital markets division provides debt and equity solutions, while the bank’s financial and regulatory section helps clients with financial regulations specific to a particular region.
Finally, the research division provides cutting-edge integrated coverage and research services.
Credit Suisse Benefits
Credit Suisse promises patrons numerous benefits with a diverse set of financial products and services tailor-made to specific requirements. On the official company website, the bank offers services in funds and ETFs, alternative investments, foreign exchange and precious metals, equities, structured products, strategic asset allocation, and market views and analysis, among other products.
The benefits of Credit Suisse, specifically within investment management, are of two types. The client can choose an option of delegating all investment decisions on a day-to-day basis to Credit Suisse. This frees them from the responsibility of constantly keeping tabs on the markets, leaving it to experienced professionals.
The other option is consultancy whereby the client makes investment decisions themselves on a day-to-day basis while they can avail from the perspectives of seasoned professionals on investment decisions in real time.
Credit Suisse Values
Credit Suisse, formerly known as Schweizerische Kreditanstalt, was founded by Alfred Escher in 1856. The bank gradually developed into one of the cornerstones of the Swiss finance sector. It has financed major infrastructural undertakings such as the Gotthard tunnel, and played a key role in the growth of some major industrial companies. It has also helped in the development of some of the giants in the insurance sector, such as Swiss Life and Swiss Re.
Based in Zurich, Credit Suisse holds a formidable reputation on the international banking stage. This was evident when it acquired the U.S. investment bank First Boston in 1990. With a presence in more than 40 countries, Credit Suisse currently employs 51,410 people around the world.
The bank holds the distinction of being one of the thirty banks in the world considered “too big to fail,” requiring it to set aside a considerable cash surplus to survive any troublesome phases.
What Is Credit Suisse Best At?
Credit Suisse has been the recipient of several awards and recognitions over the years, making its mark on the map of global finance. In 2019, the publication PWM/The Banker called it the best private bank in the Middle East. It was also conferred the title of Best Private Bank in Russia and Qatar. Asia Risk named Credit Suisse as the “Private Bank of the Year in Asia.”
The bank was also the recipient of the Euromoney Awards for Excellence during the same year, being conferred the title of “Best Bank for Wealth Management” globally. It has received numerous individual regional awards in Asia, the Middle East, and Latin America.
Why Is Credit Suisse Important?
Apart from Credit Suisse being a major player in the global investment banking sector, according to S&P Global rankings, Credit Suisse holds assets worth $829.12 billion, and is deemed the 45th largest bank in the world on the basis of these assets.
Over the past couple of months, there has been a considerable amount of speculation with regards to the bank’s stability. This time last year, Credit Suisse showed a market cap of $22.3 billion.
However, this October, that market cap has crashed to almost half of that value at $10.4 billion. The bank’s shares have also fallen by 56.2 per cent. Reports also show that the bank’s credit default swaps have hit an all-time high since 2008. It has been reported that the bank has delayed contract renewals of some contractors. One of the most senior dealmakers, Jens Welter, left Credit Suisse after 27 years in service.
Several analysts had voiced their concern that the current situation of Credit Suisse evokes a memory of the Lehman Brothers crisis back in 2008, which consequently led to a global recession.
Is Credit Suisse Collapsing?
Over the past couple of months, Credit Suisse has been at the receiving end of a lot of speculations and rumors about its stability. This has been attributed to its recurrent losses and some major risk management failures, combined with crucial changes being made in the top management.
One of the entities that Credit Suisse lent money to, Greensil, which is deemed to be the largest non-bank provider of supply chain finance, declared bankruptcy in March 2021. Credit Suisse had convinced clients to deploy large volumes of capital for funding Greensil. Although Greensil had borrowed money from several external investors apart from Credit Suisse, the ripple effect of its downturn was experienced by Credit Suisse and its clients.
Further losses were incurred when U.S. private investment firm Archegos Capital Management Investment Fund collapsed, significantly impacting Credit Suisse’s prime brokerage businesses and costing the bank more than $5 billion. Share prices of Credit Suisse have since been on a steady fall while credit default swaps, which act as insurance against companies that default on loan payments, have risen to an all-time high.
There have been allegations against the bank to have been involved in a money laundering operation in Bulgaria as well as the facilitation of irregular loans in Mozambique.
In response to the current situation, Credit Suisse has been busy reinforcing its wealth management wing and rebuilding its investment banking wing. The bank’s liquidity coverage ratio has been at 191 percent, which is deemed to be the best in its class.
Several analysts have stated that the occurrence of a 2008 Lehman Brothers type scenario has very low probability, especially when banks are much more strictly regulated today in comparison to 14 years back.