Credit Suisse's economic situation is not "critical", says Dusan Isakov -

Credit Suisse’s economic situation is not “critical”, says Dusan Isakov –



The setbacks of Credit Suisse, whose stock market value has been divided by three in a year and a half, revive fears for the future of the bank. But for finance professor Dusan Isakov, “we are in a very secure environment from a banking point of view” and the establishment is not in a critical situation.

Credit Suisse shares continue to fall. At the beginning of the week, it briefly reached a new historic low, at 3.518 francs. Despite the efforts of bank officials to reassure customers and the financial community, investors are worried. Some observers even go so far as to imagine bankruptcy. Rumors of “imminent collapse” are circulating, further ruining Credit Suisse’s stock price.

>> Read also: Credit Suisse shares hit new negative record

At the microphone of the Matinale de la RTS, Dusan Isakov, professor of corporate finance and governance in the department of management sciences at the University of Fribourg, returned on Friday to the worrying situation of the large Swiss bank.

negative spiral

First, the bank’s escapades over the past few years have tarnished its reputation. The Archegos and Greensill cases, for example, testify, according to Professor Isakov, to a problem of uncontrolled risk management, leading to heavy financial losses. “They weren’t careful enough, they didn’t put the proper safeguards in place, they didn’t scale their investment bank, when that’s what needed to be done, and in the end, that has accumulated, this poor internal risk management”, he develops.

>> Read also: Credit Suisse Risk Committee rocked by Greensill and Archegos debacles

Another issue is the governance of Credit Suisse. The bank has been playing musical chairs for several years. Senior executives also have too many pans. Last clumsiness to date, the new CEO Ulrich Körner, wanting to reassure investors last weekend, unfortunately spoke of a “critical” situation for the bank. For Dusan Isakov, this unofficial and above all uncontrolled communication is very surprising and reveals a certain “rush”, an “inexperience” which does not leave a good impression.

It also denotes the “bad media atmosphere”. “A Credit Suisse share is the price of a coffee”, some commentators would think too easily. Finally, “a tweet destabilizes the whole building”, regrets the professor.

In addition, the new boss Ulrich Körner must present his strategic plan on October 27. An expectation that swells rumors, Credit Suisse being one of the thirty major global banks considered too big to let them fail.

Finally, the markets are unscrewing, even for companies that are doing very well. “Financial markets don’t really like uncertainty,” explains the professor, referring to the context of the war in Ukraine and the energy crisis. Thus, “the financial markets are bad”, so the stock market falls and the price of Credit Suisse shares, almost mechanically, falls.

Funds are strong

However, the Stock Exchange does not tell the whole truth: the bank’s funds are in fact solid. And if the media atmosphere is bad, the economic situation is not “critical”, defends Dusan Isakov. The constantly agitated specter of the 2008-2009 bankruptcy of Lehman Brothers is not in phase with the current context, a context “which has fundamentally changed”.

“The financial crisis has been there, the authorities have regulated, they require a lot more reserve capital from the banks. (…) We are in a very secure environment from a banking point of view. (…) We know what banks do, what products they invest in, their lines of business are classic and standard”, reassures Dusan Isakov.

Finally, when asked whether to withdraw the money from your savings account as a preventive measure, “in principle, you risk nothing”, replies the professor.

Interview by Valérie Hauert and Frédéric Mamaïs

Web adaptation: Julien Furrer

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