Behind the “Credit Suisse” “Soon to Fail” Fiasco, “X-Day” Looms and “What Will Happen in Japan in the Future?

Last Updated on 10/14/2022 by てんしょく飯

The collapse of Credit Suisse, the world’s third largest private bank, and the return of the nightmare of Lehman Brothers’ collapse are the topic of much discussion on Wall Street right now.

CEO’s note: “We are at a critical moment.

On September 30, the Financial Times reported that the company’s management was in contact with shareholders to resolve concerns about its financial health.

In addition, a memo distributed by CEO Ulrich Kellner to employees prior to the October 27 announcement of the management reform plan, stating that ‘now is the critical moment,’ came to light, and fears of bankruptcy intensified.

On October 3, Credit Suisse’s share price fell 12% immediately after the start of trading, hitting a record low.

In the first place, the reason why the bank is being forced into management reform is due to two “previous convictions” in 2009. One was the collapse of its affiliate, the British financial venture Greensil. The other was the huge loss of approximately 650 billion yen incurred through transactions with the U.S. investment firm Arkegos. These circumstances are also adding a sense of reality to the crisis.

Japan’s regional banks could be mortally wounded.

On the other hand, Itsuo Toyoshima, an economic commentator and representative of Toyoshima & Associates, a former Swiss banker, points out that “they will not go under easily.

Credit Suisse is practically like Switzerland’s national bank. If something happens, the central bank will come to the rescue and protect it.

On the 27th, which is considered to be the ‘X-day,’ a large-scale restructuring plan is likely to be presented in concrete terms. Perhaps the information leaked out during the process of CEO Kellner’s internal investigation and suddenly turned into a rumor of bankruptcy.”

If it is just a restructuring, it will be dismissed as a routine event and the market should settle down soon. However, Mr. Toshima continues, “The market has repeatedly said, ‘You’ve done something wrong.

The market has turned on its head many times in the past, and it is possible that something could happen. If Credit Suisse were to fail, global market turmoil would be unavoidable. If that were to happen, the international divisions of Japanese banks would be saddled with unrealized losses on foreign securities and other assets, and smaller financial institutions such as regional banks with weak finances and profitability could well be fatally injured.

We will be keeping a close eye on the moves of the global banking giants for some time to come.