Credit Suisse’s nosedive in share prices might be just the tip of the iceberg, according to some financial experts, and is unlikely to weather the storm for Wall Street. Bob Michele, Global Head and CIO at J.P Morgan Asset Management, while speaking to a publication reportedly said, “if you think about where we were a year ago, the Fed was just starting its rate-hiking cycle. So, over the next couple of quarters, you’re going to get those long and variable, cumulative, and lagged impacts hitting the market further. So I think this is the tip of the iceberg. I think there is a lot more consolidation, a lot more pain yet to come.”
Nouriel Roubini, Professor, CEO of Roubini Macro Associates, and Professor Emeritus at Stern School of Business, New York University, remarked that Michele’s “tip of the iceberg” statement is “not an exaggeration.” He stated, “It’s a huge bank in a small country, too big to fail, too big to be saved, and if it were to collapse it will be liminal, not just for Europe but also globally.”
Roubini and Michele’s comments in light of the Swiss lender’s share value plummeting by over 20 percent early Wednesday. This happened on the heels of the US-based Silicon Valley Bank collapse, spreading widespread fears regarding the health of the American banking sector.
As per the figures provided by the Federal Deposit Insurance Corporation as of December 31, 2022, Silicon Valley Bank “had approximately 209.0 billion dollars in total assets and about 175.4 billion dollars in total deposits.”
“Credit Suisse has about 578 billion dollars in assets. This is a much bigger problem in the making,” remarked Genevieve Roch-Decter, CEO of Grit Capital.
The chief of the Saudi National Bank – the most prominent shareholder in Credit Swiss – announced recently that it was not in a position to buy any more shares of the Swiss global investment bank.
“We cannot because we would go above 10 percent. It’s a regulatory issue,” said Ammar Al-Khudairy, Chairman of Saudi National Bank. He added, “I don’t think they’ll need extra money. If you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries.”
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