Credit Suisse is at great risk of bankruptcy, which cannot be ignored

On March 14, Credit Suisse stated that the bank had found "Material Weakness" in the internal control of financial reports in 2021 and 2022, and the audit agency gave a negative opinion (meaning that I do not agree with your financial report at all. , you're talking nonsense).

Subsequently, the CDS of Credit Suisse soared five times, and the market was betting on the bankruptcy of Credit Suisse.

Now there are different opinions in the market, that is, Credit Suisse should have gone bankrupt long ago, so the current impact is relatively small, and the market value of Credit Suisse (US$7.1 billion) is not as large as that of Ruixing Coffee (US$7.4 billion).

But as market participants, what we have to do is to see the light of the day and see how big the risk is.

First of all, Credit Suisse basically cannot be rescued. Its largest shareholder is the Saudi National Bank, which is the National Bank of Saudi Arabia. The National Bank of Saudi Arabia stated that it will not inject capital for such a stupid behavior of Credit Suisse, so the shareholder side is basically hopeless.

However, Switzerland’s fiscal and tax revenue is only 232.986 billion Swiss francs a year, and its expenditure exceeds its income. It is completely unrealistic for Switzerland to take the blame for Credit Suisse’s incompetent management. At the same time, the European Central Bank is not as powerful as the Federal Reserve. The ability to cover the bottom line is far weaker than that of the Fed.

Credit Suisse, a century-old giant, is at great risk of bankruptcy, which cannot be ignored

Under these conditions, Credit Suisse's life was hanging by a thread, and it was largely hopeless.

The next thing to look at is the extent of the spread. Judging from the customer situation of Credit Suisse, there are currently 1.5 trillion Swiss francs of customer assets still in Credit Suisse, and Silicon Valley Bank, which has been on the cusp these days The total assets of its customers are only about 370 billion US dollars, which is less than a fraction of Credit Suisse.

From this point of view, no one has the ability to cover a behemoth. At the same time, due to its extremely poor operating conditions, it is also difficult to cover it from a moral perspective. Whether it is the First Republic Bank or the Silicon Valley Bank of the United States, at least its assets The end is safe enough, so the Fed can buy its safe assets, and then let these banks have money to withdraw to depositors.

Then, if the 1.5 trillion Swiss franc mine explodes, it will inevitably cause a wave of negative effects. Some unresponsive Credit Suisse depositors, investors, and counterparties will basically face huge losses. The production of the entire euro zone in 2021 The total value is only 15 trillion U.S. dollars. If 1.5 trillion Swiss francs explode, it will be equivalent to a few years for the European people to do nothing (from GDP to net balance is not much), and it is inevitable to severely damage the European economy.

Let's further deduce that the negative impact of Europe will further deepen the changes in complex situations, such as support for Ukraine, such as the economic relationship with the United States, which is not very clear at this level.

But from another dimension, the continuous outbreak of financial risks is bound to make the monetary policy loose again.

Therefore, it is currently a fork in the direction of the market.

So now is a key selection node: since it is not clear how widespread the bankruptcy of Credit Suisse is, in the selection of investment positions and investment categories, the margin of safety will become the primary consideration.

For investors with high leverage ratio, it is very necessary to moderately reduce leverage. For investors with low positions, it is a good time to choose investment products during the chaotic period.