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Come Monday, another bank will "fail" and it's the massive one this time. Markets are gonna go on a tear

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by COINS NEWS 14 Views

I don't know how many have read the news recently. The headlines go something like this:

Fail or sale? What could be next for stricken Credit Suisse

UBS seeks $6 billion in government guarantees for Credit Suisse takeover

Credit Suisse's Days Are Numbered

UBS, regulators race to seal Credit Suisse deal as soon as Saturday - FT

Credit Suisse Will Borrow Up to $53.7 Billion

Credit Suisse still has a fight on its hands despite $54 billion lifeline

Fail or sale? What could be next for stricken Credit Suisse

And this is from mainstream media.

Most of us here must have heard about Credit Suisse being in trouble for quite some time now. It's been something close to a year since they've been having serious issues. And this is only the timeframe where the issues have been publicly known. Imagine this. There were banks like SVB, Signature and Silvergate(throw in First Republic as well) who doing "ok", until sudden runs on the bank put them against, and eventually through the ropes. If they weren't forced to sell treasuries at a loss some of them like Silvergate were actually experiencing amazing growth each quarter.

Then compare that to Credit Suisse, a bank everyone already knows is in trouble, who will now face massive bank runs due to general banking panic. What kind of losses do they suffer, when they they were already facing losses, and the extent of the runs by customers on them would be even worse than their competitors precisely because of their weak health. There is almost no way they will survive as they are, even with their government bailout.

As of today, UBS Group AG is working a deal to acquire some or all of their assets. It's unknown if or how the deal will be done. As for other potential buyers:

  • The Saudi National Bank owns 9.9% of Credit Suisse. Capital requirements often prevent banks from holding more than 10% of other banks.
  • Blackrock have denied reports of intent to purchase CS

As for what Credit Suisse is up against:

  • They saw net outflows hit 110.5 billion francs ($119 billion) in the fourth quarter
  • Share prices have dropped 34% in a month
  • Prices of credit default swaps(essentially insurance for banks) are soaring
  • They have effectively no line of credit from risk-averse counterparties
  • Client assets' are still being withdrawn
  • Increased international scrutiny and tightening rules among regulators in New York, London and Frankfurt

Recent banks that failed as well as First Republic faced withdrawals between 40% and 70% of their deposits. Imagine the kind of withdrawals the already known-to-be-shaky Credit Suisse will faced. Their 50 Billion loan only covers ~20% of their deposits reported at the end of last year.

Bank of America strategists noted on Thursday, meanwhile, that Swiss authorities may prefer consolidation between Credit Suisse's flagship domestic bank and a smaller regional partner, since any combination with UBS could create "too large a bank for the country." - MSN

Barry Norris, CEO of Argonaut Capital, expects CS shares to become worthless. Bloomberg reported earlier this month, Credit Suisse raised three-month rates to as much as about 6.5% for new money of $5 million and above in Asia, significantly above competitors. I had to put that CS will "fail" in quotes in the title because at least to me, having to terrible financials that you need to be acquire is a failure, assuming they don't outright collapse.

That was a lot of words, but it's quite ironic how badly we thought of FTX and crypto in general, going back even to Terra. The banking system "seems" to be a much bigger Ponzi, and way more unstable than we could have imagined. I only wonder how markets gonna respond, and Powell's cheeks are clapping so loudly right now as the Fed interest rate decision comes on Tuesday.

Bitcoin had a big meal but still looks like it could go for seconds.

submitted by /u/OneThatNoseOne
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