Credit Suisse is currently struggling to survive after months of rumors about its liquidity and capital position. Deutsche Bank shares fell sharply. That is, some of the most intense speculation has surrounded major financial institutions. Both share prices continue to fall. On the other hand, CDS levels are reaching levels not seen since the collapse of Lehman Brothers. Therefore, they attract the attention of the market. Here are the details…
Credit Suisse CDS breaks record
A negative outcome for Swiss banking giant Credit Suisse could have repercussions similar to the Lehman Brothers fallout that triggered the 2008 financial crisis, according to reports over the weekend. On October 2, Reuters reported that bank executives are trying to reassure customers about their financial situation. In addition, it was reported that the market value of the bank fell by more than half in just one year, falling to about 10 billion dollars today. Bank stock also fell 56 percent in a year to just under $4.
Also, Credit Suisse’s five-year credit risk premium (CDS) rose six basis points to approach 247 basis points on Friday. CDS rose 15 percent on a weekly basis. This marked the highest level in 10 years. It rose to levels not seen since the 2009 Lehman crisis. A CDS is a financial agreement in which the seller will indemnify the buyer in the event of a debt default or other credit event.
Is Deutsche Bank in a similar situation?
According to various sources, Deutsche Bank is assumed to be in a similar situation along with Credit Suisse. The combined asset base of these two European banks is $2.5 trillion. That’s four times the asset base at the time of the Lehman Brothers collapse. Speculation prompted Credit Suisse CEO Ulrich Koerner to try to reassure investors and staff last week. He acknowledged that the bank was facing a “critical moment”. However, he stressed that the Swiss-based financial institution has a “strong capital base and liquidity position”.
Meanwhile, the US Federal Reserve (FED) will hold a closed meeting today. Experts say that the situation of the two big banks will be one of the topics to be discussed at the meeting. While the global market showed great volatility in the past week, Bitcoin remains surprisingly solid. As of now, Bitcoin is trading at $19,200 with a market cap of $367 billion. cryptocoin.comAs we have also reported, the crypto money, which is the leader with its market value, increased by 2 percent on a weekly basis.
