The Credit Suisse building in Switzerland. The gloves are finally off for the investment bank,sources say.Credit:AP
The negativity has weighed down Credit Suisse’s share price,which has fallen 56 per cent this year - wiping more than $US10 billion from its market value. But even more disturbing is the fact that in the past week,the cost of insuring the bank’s bonds has risen 15 per cent. As far as the market is concerned,the risk levels around Credit Suisse are rising fast.
However,the comparison with Lehman Brothers isn’t entirely on the mark. Unlike Lehman whose troubles were the tip of the iceberg of a broader debt crisis and a rot within financial institutions,which ultimately led to the global financial crisis,Credit Suisse’s troubles reflect its own brand of mistakes.
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The investment bank has had its fair share of bad bets recently,from punting client money into collapsed supply chain financier Greensill Capital tolosing $US5.5 billion ($8.5 billion) on the back of the implosion of hedge fund Archegos Capital.
That said,should Credit Suisse’s position further deteriorate its collapse would roil financial markets already on the edge and wreak wider damage,particularly in Europe.
Given the general nervousness of investors,the bond meltdown in the UK,and the general state of the global economy,it’s easy to see why the financial uncertainty enveloping a major European bank is igniting memories of the global financial crisis.