The central theses

  • Swiss banking giant Credit Suisse is struggling to restructure after scandals and allegations including money laundering for the Bulgarian mafia.
  • Their credit default swaps, which reflect the likelihood of a company defaulting on its debt, soared over the weekend.
  • CEO Ulrich Koerne sent a memo to employees late last week assuring them of the bank’s financial stability and capital reserves, although it backfired and led many to question the rationale behind the memo.
  • While some are citing this as a possible moment for Lehman Brothers, Credit Suisse seems safe from such a collapse so far.

After all the talk of the pound’s plunge over the past week, Europe’s troubles don’t seem to be over yet. This week there was a growing murmur of trouble within one of the world’s largest investment banks, Credit Suisse.

Things began to come to a head when London’s Financial Times reported that Swiss bank executives had called major investors to calm growing nervousness.

Those swirling rumors have caused the bank’s shares to fall 10% in the early hours of Monday morning. This completes a massive drop of over 60% since early 2022.

The main concern is that this cannot simply be attributed to the macroeconomic and political environment, like much of the volatility that is being felt in the markets. Some analysts are wondering if Credit Suisse could actually be a Lehman Brothers moment that could rock not just Europe’s financial system, but the world’s.


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What is actually happening here and is a bankruptcy of Credit Suisse a realistic possibility?

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Credit Suisse credit default swaps are gaining attention

One of the main reasons for concern, along with the falling share price, was the rising price of Credit Suisse credit default swaps (CDS). These financial instruments are an agreement whereby the seller of a CDS compensates the buyer if the underlying company goes bankrupt.