credit suisse crisis inside story, how did the 166-year-old credit suisse bank itself reach the brink of sinking, will India’s tension increase? – all you need to know about credit suisse…
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What is Credit Suisse crisis?
The Credit Suisse crisis began when its annual report came out. Material weaknesses were identified in this annual report based on internal audit. Not only this, Credit Suisse suffered huge losses last year. Credit Suisse has a loss of 7.3 billion Swiss francs in the year 2022. After this report came, the depositors of the bank started withdrawing money. The biggest investor of the bank did the work of pouring ghee in it like a fire. On Wednesday, the Saudi National Bank, the largest investor in the bank, said that they will no longer provide additional liquidity to the bank. The Saudi bank declined to invest further in Credit Suisse. Let us tell you that Saudi Bank has a 9.9 per cent stake in Credit Suisse. After this news came, the shares of Credit Suisse started falling. In one stroke, its shares fell by 25 per cent.
Serious allegations against the bank
Credit Suisse has been facing serious allegations. Talking about the year 2008, the bankers of Credit Suisse were arrested in Brazil. The bank employee was accused of money laundering and tax evasion. It is alleged that the officers, along with 13 Credit Suisse employees, started Operation Switzerland in 2006. After which the bank’s office was raided. Not only this, the bank was accused of providing safe haven facilities to criminals, corrupt politicians and controversial people. Like the Swiss bank of Switzerland, this bank was also accused of black money.
How big a crisis?
How big is this crisis of Credit Suisse, you can guess by looking at its bond prices that till now in March, the bank’s bond prices have fallen by 38 percent. Credit Suisse Bank’s bail-in-bonds maturing in 2027 traded at 55 cents for $1 on Wednesday. Its bid was 72 cents a day earlier. Whereas in early March it was at 90 cents. This decline shows that if the bank were to go bankrupt, the value of these bonds would be nil.
How dangerous for India
The total asset of this bank in India is Rs 20,700 crore. Credit Suisse’s stake in India’s banking system is just 0.1 per cent. If Credit Suisse Bank also goes bankrupt like Silicon Valley Bank, then it will not make a direct difference to India. The Credit Suisse crisis does not seem to have any direct effect in India. We are saying this because Credit Suisse holds only 0.1 per cent stake in India’s banking system, which is very minor. Jefferies has said in its study that Credit Suisse has a presence in the derivatives market. Let us tell you that foreign banks remain active in the derivatives market. The timeline of 96 per cent loans in the derivatives market is two years. Credit Suisse has only one branch in Mumbai, with 70 per cent of its assets in short-term, or G-secs. The deposit base of the bank is less than Rs 28 billion. That is, there is not much danger to India. In their study, Jefferies experts Prakhar Sharma and Vinayak Agarwal said that the Reserve Bank of India will closely monitor the liquidity issue and counterparty risk associated with Credit Suisse. If the central bank feels the need, it will also intervene.
Explainer: Why did America’s Silicon Valley Bank sink? Comparison with the global economic crisis of 2008[ad_2]
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