Could Credit Suisse’s Collapse Trigger a Financial Crisis? - The Average Joe

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    Could Credit Suisse’s Collapse Trigger a Financial Crisis?

    victorlei

    March 15, 2023

    Here’s what market analysts and economists are saying:

    If something were to happen to Credit Suisse, it “would be an order of magnitude more severe” than SVB and Signature Bank and could become a Lehman moment — per Economist Nouriel Roubini (BBG).

    “Credit Suisse is not just a Swiss problem but a global one,” and is a “much bigger concern for the global economy” than SVB and Signature Bank — per Capital Economics’ Andrew Kenningham (YF).

    Credit Suisse is the “tip of the iceberg” with “a lot more pain to come,” — per JPMorgan’s Head of Fixed Income (BBG).

    Credit Suisse has several major differences from SVB and Signature Bank:

    • CS is much larger. At the end of 2022, CS had assets of ~$580B, dwarfing SVB and Signature Bank’s combined assets.
    • CS is categorized as a systematically important bank — meaning its collapse could trigger a financial crisis.
    • CS has a larger global reach. It’s the second-largest bank in Switzerland with operations in over 50 countries.

    What happens next?

    Per an Opimas analyst, “it is looking inevitable that the Swiss National Bank will have to intervene and provide a lifeline” and the US Treasury said they’re closely monitoring the developments.

    Markets: The global economy is already on shaky ground, and the situation is rapidly changing. Another bank going down is the last thing we need, and at this point, it’s impossible to rule anything out.

    Investors are throwing out the chances of an interest rate hike next week — with the odds of the Fed keeping interest rates flat rising to 63.8% after the news, before falling to 51% after the Swiss National Bank’s show of support.

    Will the Fed raise rates next week? Flip a coin.

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