for the maxi rescue in the field the rival

for the maxi rescue in the field the rival

The damages of the bankruptcy of Lehman Brothersremain branded in the collective memory of financial decision makers, women and men closed in these hours in the buildings of central banks and G7 governments. The dropping of a bank with some $600 billion in debt, tied to the global economy by a thousand threads then unseen, had a colossal domino effect. He froze the trades, as everyone began to fear exposure to anyone else. The worst postwar recession unleashed in the West, until the one from Covid.

The memory of Lehman Brothers and the nightmare of central bankers

therefore also the memory of Lehman which in these hours feeds the contacts between central bankers, the heads of the Treasury of the main Western countries and many private bankers. The first objective, the most immediate, is to verify which other banks are exposed to Credit Suisse, above all in derivatives. The priority is to understand which European and American institutions would suffer losses in the event of a bankruptcy in Zurich: perhaps because certain banks have sold insurance to others against Credit Suisse's default or simply because they have claims against it. As for this, the polls of the last few hours are highlighting that Italian institutions are rather sheltered. At the moment, however, the picture for other large companies is less clear European banks. But there is also an even more urgent goal, in the contacts between capitals of the last few hours: to save Credit Suisse, or at least save its assets under a new banner; prevent the bank from taking the books to court, seeking protection from its creditors. With balance sheet liabilities of 486 billion Swiss francs (492 billion euros) at the end of 2022, this is the scenario that everyone absolutely wants to avoid.

Public rescue

The instrument cannot be a public bailout: the bank is too big for its country, with a balance sheet worth more than half of Switzerland's gross product. Rather, the aim is a sale and there is no price problem: a company with assets of the equivalent of 538 billion euros at the end of last year, but which lost 1.3 billion in the last quarter alone and is worth today on the stock exchange the equivalent of seven billion euros can be bought with little (apparently). The problem is that the bank must be torn apart in order to be sold, because no competitor is willing to absorb it whole. So more buyers need to be found in more parts of the world and quickly, because Credit Suisse is suffocating. The crisis of confidence is driving depositors to close their accounts and take them elsewhere and counterparties to deny them funding. While in theory solvent, with acceptable capital levels, the bank could collapse in the next few hours if it runs out of cash to meet the continuing demands. Yesterday evening, the central bank of Bern offered Credit Suisse extraordinary liquidity support, but the risk of financial suffocation remains.

The uphill operation

So time is running out and the operation is uphill. UBS, which is welcoming many former Credit Suisse account holders, seems interested only in the Swiss assets of its rival. Those of New York, London, Frankfurt and others remain. But it won't be easy to convince potential buyers to take charge, leaving them only a few hours to look inside the entities they are supposed to absorb. Because some of them definitely contain financially toxic materials. The management of customer savings, equivalent to 1,310 billion euros at the end of last year, can be tempting, but incredibly that area has managed to generate losses of two hundred million in the last three months alone. On the other hand, it is downright scary for anyone to touch Credit Suisse's investment banking business, which is concentrated in London And New York: at the end of last year, it alone generated more losses than all the profits generated by all the other divisions of the bank combined. the memory of the skids taken by theinvestment banking of the Swiss on scandals such as those of the Archegos fund or with the Australian financier Lex Greensill in 2021. The rivals therefore want to be sure that they are not being asked to incorporate potentially corrosive assets, even for a single dollar.

The look at Silicon Valley Bank

So the sand flows in the hourglass, too fast. It was accelerated by the bankruptcy of Silicon Valley Bank (Svb) into California Friday, which has heightened the distrust of all the already fragile banks. That shock, in turn, stems from the wrong management by the managers of the SVB of the phase of raising the rates of the large central banks. For this reason, the pressure on the European Central Bank will be very high today and on the Federal Reserve next week. But for both, stopping the squeeze and going back to cutting rates, as the market at least expects from the Fed, won't be easy: not if inflation doesn't show more certain signs of being able to drop.

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