These five scenarios threaten Credit Suisse

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Credit Suisse is in crisis mode. Not only since this week, but also on Wednesday, the share price of the major Swiss bank has dropped so much that a bailout injection from the Swiss National Bank (SNB) will be necessary – with just a loan.

But the effect wore off quickly. The price fell again on Friday, and the Financial Times reported in the evening that arch-rival UBS may take over some or all of Credit Suisse’s business. Meetings are scheduled for the weekend. Whether they were crowned with success or not remains unclear. Because there are other options for the weakening Credit Suisse.

Credit Suisse has a plan, even if you don’t believe it right now. In October last year, President Axel Lehmann (64) announced a radical restructuring. Austerity program, investment banking split and there is a strong cash injection from Saudi Arabia. You want to give yourself three years for treatment. And indeed, the Swiss National Bank and banking regulator Finma also say CS has enough money to meet its obligations, as “NZZ” writes.

But whether investor confidence will return is doubtful. The stock price has dropped more than 30 percent last month, down 8 percent on Friday alone. Added to this are the outflows of client funds. The more customers close their accounts, the less money Credit Suisse can make.

Another big bank – UBS for example – could take over CS as a whole. But how realistic is this scenario? Even though negotiations are currently ongoing, there are still many obstacles. For example, the Swiss Competition Commission will need to approve – it will likely have “heavy reservations”, former Finma boss Eugen Haltiner told CH-Media. And UBS shouldn’t want to take on the troubled opponent either.

But this need not necessarily be a Swiss solution: banks like BNP Paribas or Italian Unicredit are also floating around by name. But there are caveats here too. Credit Suisse has a large Swiss business to stay in Switzerland. Also, as “NZZ” wrote, international bank mergers have been rare lately.

Whoever gets it in the end: There’s a lot of work to be done, but only the individual divisions of Credit Suisse are also financially attractive.

It may be more interesting to buy only individual parts of Credit Suisse. There will probably be a buyer, especially for the Swiss part of the bank. “NZZ” refers to BNP Paribas, British HSBC or Spanish Santander, among other things.

Deutsche Bank is probably less interested. You need to get out of a crisis on your own.

What if no resolution is found over the weekend and Credit Suisse’s situation worsens? The bank is considered systemically important because it is “too big to fail.” Since the 2008 financial crisis, such banks need more financial reserves and contingency plans. There are three: First, how the bank wants to restructure itself. Second, it shows how systemically important functions work even in a crisis. The third plan is prepared by the Financial Market Authority. It shows how Credit Suisse will be restructured should the worst come.

The financial markets supervisory authority should initiate the restructuring. Either restructuring is possible according to the contingency plan, or – if restructuring is not likely – the supervisor may order the bank to go bankrupt. (brother)

Source :Blick