Credit Suisse and Deutsche Bank Collapse Nears – What It Means for Crypto

Updated by Ali Martinez
In Brief
  • Following a period of extreme volatility in traditional financial markets Credit Suisse and Deutsche Bank are said to be in financial difficulty.
  • Credit Suisse in particular is said to be in trouble and may look to refinance itself with a fresh round of capital investment.
  • The possibility of restructuring or even a collapse has induced a round of speculation from crypto commentators and analysts.
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Credit Suisse and Deutsche Bank, two major European banks, are rumored to be in trouble with potentially massive ramifications for crypto and wider markets.

Update Nov 1, 3:30UTC: Credit Suisse unveiled details of its plan to raise $4 billion in additional capital to support its efforts to deal with one of the biggest crises in the bank’s 166-years history. Meanwhile, Deutsche Bank hired former chairman Paul Achleitner to create a new team to advise the German bank on geopolitical and macroeconomic trends in its business.

Updated 7 Oct., 06:45UTC: Credit Suisse has said it will buy back $3 billion of debt in an effort to reassure investors. The move is seen as a way of cutting debt and boosting confidence following a slump in stock price this week.

Updated 6 Oct., 07:00UTC: The Swiss National Bank (SNB) has said it is following the situation closely. SNB board member Andrea Maechler said yesterday: “They [Credit Suisse] are working on a strategy due to come out at the end of October.” Credit Suisse stock price rallied slightly in recent days, but dropped nearly 7% in the last 24 hours.

Deutsche Bank and Credit Suisse have recently been called into question by financial analysts and crypto commentators alike. The Swiss bank a particularly hot topic of discussion.

Credit Suisse Collapse, Faces “Challenging” Period

In an attempt to calm nerves about Credit Suisse collapse, Chief Executive Ulrich Koerner sent a memo to employees. The memo was subsequently leaked to Reuters on Friday and backfired spectacularly.

In the disaster memo about Credit Suisse collapse, Koerner says “this is a critical moment for the whole organization” as well as a “challenging period.” But adds that the bank is being reshaped towards a “long-term, sustainable future.”

The problem for Koerner and Credit Suisse is that to reshape the Swiss bank, it will require fresh capital. At the moment, the Swiss bank doesn’t look like the solid investment it once did. 

On Monday, Credit Suisse stock price (CSGN) fell 11% when the markets opened, contributing to a YTD drop of 59%. This accelerates a long and gradual period of decline for CSGN. It is now down 91% from its 2007 peak, nearly making Credit Suisse bankrupt.

Deutsche Bank Share Price Fall Like Credit Suisse Stock, But Is the Media Wrong?

It is ironic that the rapid devaluation of CSGN shares this week may have been sparked by Koerner himself. Koerner argued that much of the concern seen the media, the markets, and around the Swiss bank was noise.

“I know it’s not easy to remain focused amid the many stories you read in the media – in particular, given the many factually inaccurate statements being made. That said, I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank,” he said.

This caused Wall Street Journal‘s Spencer Jakab to compare the hubris of Credit Suisse collapse to the Lehman Brothers.

Jakab took to Twitter to say, “it’s a bad look and counterproductive when bank execs make statements about the market being wrong. In this particular business, the market’s opinion can be self-fulfilling at times of stress.”

According to Jakub, CEOs of big banks can induce additional financial pressures by ignoring or dismissing market sentiment and concerns.

“Herr Korner, two whole months into the job of big bank CEO, is tempting fate by saying the market is wrong,” saids Jakab.

On Saturday, IP Banking Research reported that both Credit Suisse and Deutsche Bank were now trading at distressed valuations. Still, the latter remains in better shape.

“Credit Suisse (CS) is currently trading at 0.23x tangible book. Deutsche Bank (DB) is trading at 0.3x tangible book value. These are very distressing valuations for banks, even so for European banks,” said IP Banking Research.

This means that the swiss and german bank stock prices are trading below the value of their company assets.

Can the Swiss Bank and German Bank Trigger a Crypto Collapse?

There is almost nothing that crypto Twitter users like to talk about more than trouble in traditional financial markets. Even if the institutions themselves, such as Credit Suisse, have been known to be cautiously positive about digital currencies

It is hardly surprising that crypto commentators were lining up to take potshots at the Swiss bank and its woes.

“Credit Suisse is probably going bankrupt,” Wall Street Silver told his 320,000 followers on Saturday, summing up the general sentiment. “Markets are saying it’s insolvent and probably bust.”

An account called Inflation Tracker was even more dramatic. On Monday, it summed up the size of any potential problem. 

“Lehman Brothers had $600 billion in assets when they collapsed and died. Credit Suisse has $2,800 billion in assets. If you thought 2008 was bad just wait. Global financial markets on brink of insolvency. Credit markets about to get shut down,” it said.

Meanwhile, JAN3 founder Samson Mow was reassuring his followers that the bottom for Bitcoin price is already in. 

Mow said the BTC price “is already pushed down to the limit, well below 200 WMA. We’ve had contagion from UST/3AC, and leverage flushed already. BTC is massively shorted as a hedge. Even if Credit Suisse / Deutsche Bank collapse & trigger a financial crisis, can’t see us going much lower.”

Even with such unshakable confidence in Bitcoin price, Mow went on to joke, “Famous last words.”

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