On Tuesday, fears of a global banking crisis intensified as shares of Credit Suisse plummeted to an all-time low during pre-market trading. The Swiss financial giant’s delayed annual report revealed the biggest loss since 2008, as well as a heightened rate of customer withdrawals beginning in the fourth quarter of last year.
Last week’s fall of Silicon Valley Bank and Signature Bank added further pressure on the banking stocks, with investor Robert Kiyosaki speculating on Fox Business Network that Credit Suisse is likely to be the next bank to succumb to an unpredictably volatile bond market.
Shares of Zurich-based international financial giant Credit Suisse plummeted to an all-time low during pre-market trading following the release of their annual report. The report revealed the biggest loss since 2008 and a sharp increase in customer withdrawals starting in the fourth quarter of last year.
The fall of Silicon Valley Bank and Signature Bank last week has further battered bank stocks, resulting in a marked drop in their value.
Credit Suisse Crashes To All Time Low After Boosting Deposit Rates To Reverse Bank Run https://t.co/mSEd50Ci2J
— zerohedge (@zerohedge) March 2, 2023
Kiyosaki said, “My prediction, I called Lehman Brothers years ago, and I think the next bank to go is Credit Suisse because the bond market is crashing.”
If this turns out to be true, its repercussions would be felt around the world; Credit Suisse not only holds an impressive spot among global banking giants but it also offers extensive private banking services across multiple countries.
In a statement, the bank acknowledged “material weaknesses” in their risk assessment and monitoring activities. As they put it: “The material weaknesses that have been identified relate to the failure to design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements and the failure to design and maintain effective monitoring activities.”
Credit Suisse’s struggles began prior to the ongoing banking crisis, with the company’s stock price plummeting more than 80% since March 2021. Despite their insistence that withdrawals have recently slowed due to higher interest rates for deposits, their recent statement has alarmed investors and could cause a run on deposits – similar to what took down Silicon Valley Bank in 2020.
In such a case, no bank can withstand the panic-driven surge in withdrawals as much of the deposited money is usually invested- for instance, billions were used by Silicon Valley Bank to invest in long-term U.S. Treasury bills and corporate bonds- which perished as the Federal Reserve increased interest rates aggressively in order to ward off inflation.