Credit Suisse Group The 167-Year-Old Bank Has Officially Became History

Credit Suisse's US $17 billion AT1 bonds were wiped out. This bonds is similar to preferred shares. In the liquidation priority list, it is only higher than common stocks, so the risk is relatively high. According to the Swiss Financial Market Supervisory Authority, one of the decisions of the acquisition is wiping out this bond. Which means the AT1 bond investors lost the most in the acquisition. Some investors were outraged toward the decision, but the Supervisory Authority said that the original intention of AT1 bond issuance was to absorb losses for banks, so those investors should not be surprised.

Yardeni Research said that the probability of the banking crisis this time will not be as tragic as the 2008 financial crisis.

I am partially agreeing with Yardeni’s view. I think that the crisis this time will not be the same in 2008, because major problems has not yet occurred in the loans of these banks. But I am not very optimistic about whether the Fed can stabilize the market. Historically, almost every rate hike has been accompanied by a recession, so this time is probably no exception. The Fed has a tough choice now, it faces credibility challenges and a banking crisis. If Fed choose not to raise interest rates on Wednesday, the market will have even less confidence in the Fed's determination to control inflation in the future. And if it raises interest rates by 25 basis points, it could further aggravate market turmoil. Therefore, I think we investors must prepare for the worst and prepare for the recession.