Financial pandemic strikes Swiss bank Credit Suisse. Where does India stand in the middle of this banking crisis?

Amrutha Pagad
Amrutha PagadMar 17, 2023 | 10:50

Financial pandemic strikes Swiss bank Credit Suisse. Where does India stand in the middle of this banking crisis?

Credit Suisse sued by US shareholders. Photo: DailyO

The banking sector seems to be hit by a pandemic. The crisis so far has been mostly contained to the US, and the European market. After the collapse of two US banks - Silicon Valley Bank (SVB) and Signature Bank - another bank, Credit Suisse, is facing a financial crisis. 

But with Credit Suisse, the story is different and more alarming than SVB or Signature Bank in the global sense. And by global, India is obviously included in the discourse. 


Why is Credit Suisse important in the Indian context? 

  • In the Indian context, you must have heard of Swiss banks and black money. Often having money in a Swiss bank is equated with having black money. 
  • Credit Suisse is one such Swiss bank. It's the 2nd-largest bank in Switzerland.  
  • A 2014 Hindu report states that two banks - UBS and Credit Suisse - make up nearly two-thirds of the total money held by wealthy (of course) Indians in the Swiss banking system.  
  • Swiss banks are famed for their hard-to-pierce secrecy walls. 
  • In the current Indian banking scenario, Credit Suisse is the 12th-largest foreign bank in India and has up to Rs 20,700 crore worth of assets. 
  • Rs 20,700 crore may sound like big money for most of us not-so-rich Indians, but in the Indian banking sector, it is just 0.1% of assets. 
  • Meaning, Credit Suisse doesn't pose a direct concern for India. However, it is a much bigger concern than SVB ever was. Reports say RBI is keeping a close watch.
  • Analyst Prakhar Sharma of Jefferies India (wealth management) says Credit Suisse is a bigger concern than SVB to India. 
  • This is because Credit Suisse is connected to the larger global financial system. Experts say the bank has a major presence in something called "India's derivatives market".

  • Derivatives are "financial contracts that earn their value from a group of assets". 
  • For India, it is also an important lender, as some Twitter users are busy reminding people that Credit Suisse rejected bonds as collateral for some loans by Adani Group entities following the Hindenburg report.

What's happening with Credit Suisse? 

First, check out this Simpsons clip:

  • While the problems ailing Credit Suisse come on the heels of that of some big enough US banks, the Swiss bank's problems are largely different that the rest. 
  • Credit Suisse can't seem to catch a break when it comes to seeing its name up the list of scandals. 
  • From cocaine money laundering to spying, the bank has seen it all. And it has been paying billions of dollars in fines to regulatory agencies in the US, even in India and Switzerland.  

Leonardo DiCaprio may as well be signing the next Wolf of Credit Suisse movie right now.

  • The latest turmoil was caused after Credit Suisse's biggest shareholder Saudi National Bank said it won't be injecting any more cash into the bank over regulatory issues. 
  • This created panic among already jumpy (due to US bank failures) investors. 
  • Also, US shareholders at Credit Suisse have now sued the bank for fraud claiming that it tried to hide its financial health.
  • The shareholders said that the bank did not inform the investors about significant customer withdrawals following the many scandals. 
  • Amid the chaos, the Swiss central bank came to the rescue of the over 100-year-old bank, injecting $54 billion in form of emergency funds. 

  • Credit Suisse's stock which was on a nose dive on Wednesday, seemed to have recovered a little. But the future is still uncertain.
Last updated: March 17, 2023 | 11:19
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