Credit Suisse - Is it going to go bust, if so what happens?
Discussion
What I'm curious about is going back to Mr T's comment about double entry (in the link) and money can't be created (therefore not destroyed either?)
https://www.pistonheads.com/gassing/topic.asp?h=0&...
If this is true then where has all the money gone? The Saudi money put in recently, there has to be some winners as well as losers right?
Or if not exactly winners, a side that's done better than it otherwise would have?
DeejRC said:
Scooter, there are effectively 2 answers at play here: 1) the “money” that’s been “lost” didn’t actually exist, it was virtual, 2) any inward investment from external sources has been hoovered up by the SNB.
re 1) this is the contentious and not easily understood part, as in the link others were claiming money cannot be created by these commerical banks and so it's all traceable via double entry. 2) has a whiff of theft about it!?
things were tight already at CS, they were unable to reduce their costs and their revenues were flat.
Source: https://seekingalpha.com/article/4539059-credit-su...
They were paying too many people 200-250k GBP salaries and when they started to eliminate these mid-level (cough) hires, they could not back-fill them with people who were competent enough to do the roles and therefore ended up paying the usual suspects enormous contract day-rates which then exasperated the problem of slowing down the separation of the IB unit.
What they really needed to do was somehow accelerate the exit from Investment Banking without ballooning the wage bill but, as anyone who has worked on these types of separation programmes before, it takes years, at least 3 years but typically 5-7.
Ironically, if you try and accelerate these types of programmes, your operational costs go up, at least in the short to medium term.
OK so the separation did not happen quickly enough at CS and you could argue, it took the rest of the bank with it. Almost identically, the same thing could/should/would happen at Deutsche Bank as well but for some reason, they are just managing to keep their head above water.
Source: https://seekingalpha.com/article/4539059-credit-su...
They were paying too many people 200-250k GBP salaries and when they started to eliminate these mid-level (cough) hires, they could not back-fill them with people who were competent enough to do the roles and therefore ended up paying the usual suspects enormous contract day-rates which then exasperated the problem of slowing down the separation of the IB unit.
What they really needed to do was somehow accelerate the exit from Investment Banking without ballooning the wage bill but, as anyone who has worked on these types of separation programmes before, it takes years, at least 3 years but typically 5-7.
Ironically, if you try and accelerate these types of programmes, your operational costs go up, at least in the short to medium term.
OK so the separation did not happen quickly enough at CS and you could argue, it took the rest of the bank with it. Almost identically, the same thing could/should/would happen at Deutsche Bank as well but for some reason, they are just managing to keep their head above water.
Scootersp said:
If this is true then where has all the money gone? The Saudi money put in recently, there has to be some winners as well as losers right?
Or if not exactly winners, a side that's done better than it otherwise would have?
Saudi bank bought Credit Suisse stock at 3.82 Swiss francs per share. UBS is paying Credit Suisse shareholders 0.76 francs per share.Or if not exactly winners, a side that's done better than it otherwise would have?
The Saudi cash injection went into CS and got spent on expenses of running the bank - debit = credit.
Saudi bank will show an 80% loss on investment in its balance sheet when it gets the UBS shares, assets down and profit down - debit = credit
A few years ago Banco Popular Contingent Convertibles also wiped out after they were being taken over (and not so long ago they have already passed an annual stress test?) , so Credit Suisse AT1 issue is not a first.
Here the issue I guess, expectations from the regulators. They were supposed to freeze dividends, stop bonuses before things hit AT1.
Here the issue I guess, expectations from the regulators. They were supposed to freeze dividends, stop bonuses before things hit AT1.
So all sorted calm restored, or a pause before something else needs attention.?
Anyone any comment on this guys view (15.51 his view on the credit suisse situation) I don't think he sees this as the end of the problems?
https://www.youtube.com/watch?v=7zJEib9OFis
Anyone any comment on this guys view (15.51 his view on the credit suisse situation) I don't think he sees this as the end of the problems?
https://www.youtube.com/watch?v=7zJEib9OFis
vaud said:
Professional services will cover all manner of things - legal, audit, tax, outsourced IT (the latter will be quite a big number)
of course, the arguement being that CS tried to reduce its wage bill but ended up doing the reverse. they were then hit with capital outflows, increasing operational costs and lower revenue spelled the beginning of the end.
I was replying, I suppose to the question of 'where did all the money go' . it's easy to burn through tens of billions just keeping something like this afloat.
The regulator has imposed suspensions of variable remuneration components.
https://www.admin.ch/gov/en/start/documentation/me...
Apparently that will affect UK staff; how is that legal?!
https://www.admin.ch/gov/en/start/documentation/me...
Apparently that will affect UK staff; how is that legal?!
DeejRC said:
I suspect it’s not the end of the current problems. Here though I will defer to Isaldiri and Whoozit who have way more international finance knowledge than me.
The sharks have been out for DB for a while though…(yes I know I’m being mischievous
)
DB has managed to clean up its act and to turn its business around. It’s on a much sounder footing than CS ever was over the last 5yrs and it actually has a viable business model now. The sharks have been out for DB for a while though…(yes I know I’m being mischievous
)CS had an uncanny resemblance to DB - how many times can you f
k up, get bailed out by shareholder cash and fk up again? At least DB fked up, raised cash, said sorry and got on with the business of cleaning up its image and returning to what it’s good at - Fixed Income… CS just spunked the cash and kept getting involved in problems, which were typical for 2006 and not 2022…Have plenty of friends at CS and feel bad for them, but the bank was run like a pirate ship and in a way it’s a relief that it happened and it got nipped in the bud…
ooid said:
So where is this famous CS Junior Bond Escaped the wipeout? Looks like it is supposed to be REG S and the 144A but can't find it on CS's DC structure? 
We had buyers today of the CS AT1s… I suppose at sub 5c on the dollar and with Pimco and few others getting their lawyers ready it could be worth a cheap punt… Cheburator mk2 said:
We had buyers today of the CS AT1s… I suppose at sub 5c on the dollar and with Pimco and few others getting their lawyers ready it could be worth a cheap punt…
Lawyers always win...... ooid said:
So where is this famous CS Junior Bond Escaped the wipeout? Looks like it is supposed to be REG S and the 144A but can't find it on CS's DC structure?
this I believe is the onehttps://www.credit-suisse.com/media/assets/corpora...
Edited by isaldiri on Tuesday 21st March 21:10
isaldiri said:
ooid said:
So where is this famous CS Junior Bond Escaped the wipeout? Looks like it is supposed to be REG S and the 144A but can't find it on CS's DC structure?
this I believe is the onehttps://www.credit-suisse.com/media/assets/corpora...
Whoozit said:
A quick read of the relevant write down terms (page 64-65) suggests the triggers for a write down weren't met. 7aii says it's a 5% trigger for a defined capital base, 7aiii says it has to be a general write down across the defined capital stack. IANAL but I spent many years reading and drafting prospectuses.
Agreed - that's why it's survived I guess unlike all the others where the prospectus wording did allow for the regulator to decide whether it was necessary for the bond to be written off.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff