Credit Suisse Collapse: What's Next?

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To put it simply, Credit Suisse's collapse will rock the financial world for at least the next year. Before its default, Credit Suisse was identified as a Global Systematically Important Bank (G-SIB), or in other words, they were considered as a bank 'too big to fail' due to the value of the assets they held, over $1 trillion Swiss Francs.

I previously wrote that SVB Collapse sent a nostalgic flashback to the Lehman Brothers collapse in 2008, in a way, Credit Suisse's collapse has further amplified the call of a possible recession ahead. 

But unlike SVB Collapse, Credit Suisse did not collapse because of a decision they made, they collapsed because they were poorly managed resulting in lawsuits, tax fines and fees and thus, a loss in financial trust. The S&P gave Credit Suisse a rank of BBB-, the lowest of any G-SIB bank. As Author Patrick Dixon points out, "In business or finance, trust is the only thing you have to sell".

In my opinion, the Swiss Central Bank were caught between a rock and a high place, resulting in the poor decision to inject $54bn into the bank days before its imminent collapse. How is $54bn able to save a bank holding over $1t in assets? The Central Bank should have done one of the following:
  1. Fully Bailout Credit Suisse through either Taxpayers Money or Long-Term Debt 
  2. Fully 'ignore' the Credit Suisse collapse and only protect Swiss citizens affected by its collapse
To be honest, I was oddly surprised that the Swiss Bank did not go with option 1. Credit Suisse is not just big, its reputable. Letting your country's largest bank collapse hurts your reputation, especially Switzerland, a country's whose wealth substantially came from their financial expertise. 

I think the next week in the Stock Market will make or break the next year. To be franc, it will likely come down to the possible hike in interest rates on Wednesday, 22 March. At this point, we simply do not know. But we do know that Credit Suisse will be taken over by its arch enemy, UBS. 

My simple prediction is that for at least the next 10 years, UBS will be safe from financial distraught something The Swiss Government will definitely ensure. The question now is, could another G-SIB bank collapse? Right now, we just don't know yet. 

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