Major Swiss bank troubles herald possible economic crisis?

The shares of Credit Suisse CSGN.S, a leading global provider of financial services, slid by as much as 10 percent on Monday, reflecting market concerns ahead of a restructuring plan due to come with third-quarter results at the end of October.

Swiss regulator FINMA and the Bank of England in London, where the lender has a major hub, were monitoring the situation at Credit Suisse and working closely together, a source familiar with the situation stated.

Credit Suisse's recent problems were well known and there had been no recent major developments, the source added.

Chief Executive Ulrich Koerner last week told staff that Credit Suisse, whose market capitalisation had dropped to CHF 9.73 billion (USD 9.85 billion) on Monday, has solid capital and liquidity, while bank executives spent the weekend reassuring large clients, counterparties and investors about its liquidity and capital, the Financial Times reported on Sunday.

Dramatic losses

Credit Suisse’s euro-denominated bonds dropped to record lows, with the Swiss bank’s longer-dated bonds suffering the sharpest declines.

Although JP Morgan analysts said in a research note that, based on its financials at the end of the second quarter, they view Credit Suisse’s capital and liquidity as “healthy”, over the past three quarters alone, Credit Suisse's losses have added up to nearly CHF 4 billion (USD 4.05 bn).

Credit Suisse shares, which have fallen by more than half this year, were down 10 percent on Monday.

A new strategy

In July, Credit Suisse announced its second strategy review in a year and replaced its CEO, bringing in restructuring expert Koerner to scale back investment banking and cut more than USD 1 billion in costs.

Last month, Reuters reported that Credit Suisse was sounding out investors for fresh cash as it attempted its overhaul.

Credit Suisse’s total assets reached approximately CHF 727 billion (USD 735.68 bn) at the end of the second quarter of 2022.