The recent turmoil surrounding the Swiss bank has sent shockwaves through the financial industry across the world, with many concerned about the potential impact on a wider economy.
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Credit Suisse stock was down more than 27 percent at around 1.6 Swiss francs in mid-afternoon trading on the SIX stock exchange on Wednesday. That’s down more than 85 percent from February 2021. The Swiss exchange says the drop in Credit Suisse shares triggered a temporary, automatic pause.
In an interview with CNBC-TV18, Jahangir Aziz, Head of Emerging Markets Economics Research and Commodities at JPMorgan said that there will be a serious credit impact due to Credit Suisse.
He said, “Equity of Credit Suisse has been battered but that does not necessarily mean that the credit impact of Credit Suisse is going to be that bad. I am not saying that there won’t be a credit impact; there is likely to be but it will be taken over by the other bigger banks in the European time zone.”
However, despite the concerns, Aziz does not believe that we will see a failure of Credit Suisse. While the bank has been hit hard by recent events, he suggests that it is unlikely to completely collapse. Instead, he believes that Credit Suisse is likely to be taken over by other bigger banks if the impact continues.
The tumble came after Ammar Al Khudairy, the chairman of key Credit Suisse shareholder Saudi National Bank, told Bloomberg and Reuters that it has ruled out further investments in the Swiss bank to avoid regulations that kick in when it has a stake above 10 percent.
While the situation is certainly concerning, it is important to remember that this is not a banking crisis. While Credit Suisse may be struggling, the wider financial industry remains stable.
However, while it is unlikely that we will see a complete collapse of Credit Suisse, there is still a significant risk of further impact on the wider economy.
According to Aziz, this is not a banking crisis, and there is no need to be overly concerned about the wider stability of the financial industry.
For more details, watch the accompanying video