Usually above directors
Another example for selling stock options (of the company you work in) as soon as possible…
don’t touch it with a long stick.
1.00 CHF is another 30% down.
But now it’s 1.928, +24% above the current low (1.555)!
A missed opportunity ?
catching a bear market rally’s timing is a fool’s errand.
CS’s bear market is sustained for the last 5 years with an impressive 90% down.
Who on earth would swallow Credit Suisse at this point?
If anything, I’d bet they’ll be carved up into pieces - with you as a shareholder ending up owning (part of) the bad (i.e. worthless) parts of the company. Even if they’re going to be restructured or recapitalised in some other, you’ll be holding the bag.
Your best bet with that, IMO, is honestly that they’ll survive as a whole and independently - possibly by government bail-out.
The SNB anounced it will provide liquidity to Credit Suisse if that becomes necessary. The also state, together with FINMA, that CS meets the regulatory standards for both capital and liquidity requirements: https://www.snb.ch/en/mmr/reference/pre_20230315/source/pre_20230315.en.pdf
I don’t know what to think of this one. One one hand, CS is likely systemically important and its fall could break the system. On the other one, if you find “material weakness” in your previous financial reportings, that is a very meaningful failure of the people actually paid to do these reportings that relies on either incompetency or actual malice and this absolutely has to bear consequences or what we are actually saying is that if your bank is systematically important, you can put whatever you want in your financial reportings and as long as they look genuine enough for you not to get caught right on the spot, you’re good.
I’d really want to learn more about the actual situation but can only find one line articles on the topic (that is, there is only one line of actual information and no details provided). It is, in particular, not clear to me what entities would be subject to what (Credit Suisse (Schweiz) AG vs Credit Suisse AG vs Credit Suisse Group AG).
More information in Credit Suisse (Schweiz) AG’s annual report, page 10 (emphasis mine): Credit Suisse (Schweiz) AG – Credit Suisse
Credit Suisse Group’s management has made an evaluation and assessment of the internal control over financial reporting as of December 31, 2022. Based upon its review and evaluation, the Group’s management has concluded that, as of December 31, 2022, the Group’s internal control over financial reporting was not effective as it did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements. As Credit Suisse (Schweiz) AG relies on the Group’s internal control framework designed for the preparation of the financial statements, the Board of Directors of Credit Suisse (Schweiz) AG concluded that this material weakness could result in misstatements of account balances or disclosures that would result in a material misstatement to the annual financial statements of Credit Suisse (Schweiz) AG that potentially would not be prevented or detected.
As a consequence, the statutory auditor PricewaterhouseCoopers AG (PwC) has noted that Credit Suisse (Schweiz) AG did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements within this system.
Notwithstanding the existence of this material weakness in internal control over financial reporting, Credit Suisse (Schweiz) AG confirms that its financial statements as at December 31, 2022 comply with Swiss law as reflected in PwC’s report on those financial statements.
They are basically saying that there could have been fraud, that they don’t know if fraud has occurred and are laying the basis for reducing their liability in case it did occur. The auditing company (pwc) is also taking good care of distanciating itself of any statement made by the bank.
Looks very not reassuring to me.
On a side note:
“On January 1, 2023, a partial revision of the Swiss Federal Law on Banks and Savings Banks (Bank Law) became effective, which included changes to the Swiss deposit insurance guarantee program. Under the revised program, among other changes, the jointly guaranteed amount is now determined as the higher of CHF 6 billion or 1.6% of all protected deposits.”
It previously was CHF 6B, period. Seems like a step in the right direction, although 1.6% seems awfully low as a basis for calculation of the amount provisioned by the insurance guarantee program.
Edit: more words but not more details in Credit Suisse Group AG’s annual report, pages 50-51: Investor relations – Credit Suisse
I have only skimmed these reports, if anybody finds anything of substance worth mentioning and takes the time to do it, I’ll be very grateful to them.
To tell the truth, I don’t know who would have the balls to take a stand. I can imagine either UBS for some reason, a big American bank or even a French bank (let’s be crazy!).
I think CS will disappear one way or another and if it does happen, I would be happy if I could collect a few dozen francs. I prefer to be on the side of the pessimistic idealists. Time will tell if this was a good idea .
“We fulfill and overshoot basically all regulatory requirements.”
– Of course you do, it’s easy to overshoot anything with faking (sorry, “materially misstating”) it.
To be clear: I don’t know if there have been material misstatements in CS financial statements, the only thing they have communicated upon is that they have not assessed wether there were and had no process to do so.
I assume it is part of what was pointed out to them by the SEC that presumably led to the postponing of the annual report release, so I assume it is important. I haven’t compared the 2022 annual report with the 2021 one and haven’t compared such report to another one published by one of the big banks (say UBS and JPM), I also don’t have additional information and as such am only doing assumptions.
That being said, I wouldn’t consider the low stock/bonds price as a buying opportunity.
Well to be fair to facts coming out recently:
- “we’re all fine” says the leadership at every single event → usually a red flag
- SEC finds undisclosed “irregularities” which were not really detailed
- one CS entity blaming the other one for their common faults at risk management
- SNB stating they are watching closely AND they are happy to step in with liquidity as required → just 2 days after the Fed stepped in with liquidity in 3 failed banks
… one can only see the writing on the wall.
To be fair the statement is “Material weakness in reporting and control procedures”(*)
It means risk of having a potential reporting miststatment which is not at all the same as having an actual mistatement. I am not aware of fraud either
I have no affiliation to CS but if it is badly damaged as seems likely it is bad news for the swiss economy and for consumers.
(*) press article
“…PwC noted that management did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its consolidated financial statements within this system”
Is anyone trading Bonds?
This new policy is just a joke for any bond traders, why even bother to trade bonds if you can “redeem” them at the FED or SNB for 1:1 value?
Nobody can redeem bonds at the FED at par value. Banks can borrow against specific securities (mostly government issued ones), at par value, for an interest rate (Overnight Index Swap +10 bps) for one year: The Fed - Bank Term Funding Program
The OIS+0.1% is likely to be higher than the coupon on the underwater bonds used as collateral with this program, so making use of it should still cost the banks something. They get access to liquidity, at a cost.
Corporate bonds are unaffected, except insofar that bank behavior may differ slightly in regards to what bonds and how much of them they buy under the current circumstances and depositors may have a (false) sense of security, considering their assets safe in a bank account, instead of using short term bonds for their bigger cash balances.
It is the lesser evil that could happen: failing banks management, shareholders and bondholders feel the heat while depositors are protected, avoiding bank runs that could/would spread to the whole industry.
For the specific case of Credit Suisse, we don’t know what specific agreement was reached with the SNB. It is likely to involve some sort of interest payment, and the executive board are already voluntarily (by decision of the bank’s board) getting no bonuses for 2022. Management that did mistakes is likely to feel internal burn too. Stocks and bondholders are as exposed as ever, except the Bank/Group face a lower risk of liquidation (which is a big bonus, I grant you that).
Bonds of the banks “at risk” are subject to the same risks as usual (bondholders are not getting bailed out), older treasuries may become more attractive but their market is already affected by the FED balance sheet policy so the net effect is hard to calculate, and I would say that banks’ treasuries assets are a drop in the ocean in regards to those already present on the FED’s balance sheet.
I’d say trading bonds is as attractive as ever, except they now have some yield, may still be subject to more interest rate hiking risk. They are exposed to credit risk as usual (and some institutions are now being considered as more risky than was previously assessed).
CSGN already back at 2.09 atm… Thanks to SNB.
I consider this a bail-out.
What does anyone gain by having CS failing? (esp. in a run which often doesn’t mean the bank did anything bad, but has a liquidity/trust crisis)
Just read Register to read | Financial Times which looks like a deeper explanation as to what’s going on.
In the short-term, nothing. Quite the contrary. Except for short-sellers.
My issue with this type of bail-out is that it weakens the currency (because there’s more of it than there would otherwise be) and thus hurts everybody. Another aspect is that it encourages more risk-taking in the future. No chance for any bubble to deflate.
As much pain as it is, I think the equity and bond holders should be wiped out in these scenarios. We would probably have a recession, which is bad and hurts, but zombie companies doing things that aren’t actually that useful would fail and people would spend their time on more useful things. More new companies and ideas would come up - in crisis there is opportunity.
The government and central banks think they can control everything with the money supply, but I think it just leads to a much larger crisis many decades later.
But this is just my opinion, I think most people would disagree (including in this forum).