A state of banking

Yes, the banking issues remain and they are seemingly getting worse. This is seen in the BBC (at https://www.bbc.co.uk/news/business-65467019) where we are given ‘Credit Suisse: Asia investors sue Switzerland over bank collapse’, which reads funny, but that is the effect of lawsuits. Yet that article and the BBC article (at https://www.bbc.co.uk/news/business-65370751) named ‘£55bn withdrawn from Credit Suisse before rescue’ gave me reason to pause. This was not some setting of chance. Can you grasp how much £55,000,000,000 is? That is not some account, some people. That is the works of a few titans and someone gave THEM the heads up. So when we are given “The Swiss banking giant said 61.2bn Swiss francs left the bank in the first three months of the year” there I an issue, this is not merely a bank run. Then this many multimillionaires are running for the hills, someone set the watchtower on fire and stated, run for your life. Yes, it is highly speculative, but 55 billion pounds? That is serious cash in any economy. So when we consider the first article and we see “Already a Credit Suisse client for several years, he bought around $500,000 worth of bonds in January despite the bank having been hit by a series of scandals and compliance problems over the past few years” as well as “The type of bonds he bought from Credit Suisse are known as AT1 bonds, or contingent convertibles. They normally carry high yields for investors but are considered among the riskiest bonds that banks issue”, so in January this person decided to take a high risk setting, and in that time, or at least over the next 6 weeks when a staggering amount of billions pulled out, that person sat still? I know there is a sucker born every minute, but this comes across as the emperor of all suckers. Then we get the mother of all issues “Central to their claim is who was given priority when the bank failed. The terms of the bonds, seen by the BBC, show that bondholders are, if possible, supposed to be compensated first, after which come shareholders. But in practice, shareholders were allowed to exchange their Credit Suisse shares for UBS shares, albeit at a vastly reduced value.” There we see two parts. The first is ‘if possible’ which is a dangerous subjective term, the second is the stage of when they were alerted? How reachable were they?

Then the second article gives on tiny sliver. It is “Credit Suisse had been loss-making and had faced a string of problems in recent years, including money laundering charges.” As such, at what moment in delusional time is buying bonds in a loss making company a good idea? That is beside all the legal issues (including money laundering). In which situation (when it is not a government) are you investing in bonds in something that is losing money? Those in March (if they had done their homework) would have seen dozens of billions of pounds leaving that ‘sinking’ vessel. Only those with a peculiar sense of delusion are setting their up their portfolio in such a place. And when we see the end of the article giving us “The deal, when it was announced, valued Credit Suisse at $3.15bn (£2.6bn), whereas on the Friday before the settlement was reached it had been valued at about $8bn.” A place that is a mere 32% of its value in a week and 55 billion went the way of water whilst the bank went the way of the dodo. When a bank is a mere 8 billion and 55 billion left its shores? Even if half leaves the shores, I would be running like Forest Gump and no chocolates would be required. So I ask you are these investors that banked on governments saving their coin (and hide)? Is that what governments do now, all whilst they fail to hold banks to account?

I will let you decide, enjoy the weekend.


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Filed under Finance, Law, Politics

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