Martin Young
Trouble is brewing in the European banking sector as one of the region’s leading financial institutions starts to show signs of weakness.
Credit Suisse is currently fighting for survival following months of rumors regarding its liquidity and capital position. According to reports over the weekend, a negative outcome for the Swiss banking giant could have similar repercussions to the Lehman Brothers fallout, which triggered the 2008 financial crisis.
On Oct. 2, Reuters reported that bank executives have been attempting to reassure clients about its financial position. It was also reported that the bank’s market capitalization has fallen by more than half in just a year to around $10 billion today. Bank stock has also dumped 56% in a year to just under $4.
Furthermore, Credit Suisse’s five-year credit default swaps (CDS) jumped six basis points to close to 247 bps on Friday, this is their highest level in at least 10 years. A CDS is a financial agreement that the seller will compensate the buyer in the event of a debt default or other credit event.
Other reports suggest that Deutsche Bank could be in similar dire straits, as indicated by its stock performance over the past year.
Crypto Community Reacts
The crypto community has reacted to the news by pointing out that, yet again, banks are responsible for the financial calamity. On Oct. 3, Crypto YouTuber Lark Davis observed that Credit Suisse and Deutsche Bank have a lot of assets under management, and a collapse could trigger another financial crisis.
“They have 2.7 trillion in assets under management between them. This could be our “Lehman” moment when shit REALLY breaks.”
Other macro investment experts and analysts have offered their take on the banking quandaries suggesting it could bring down the entire European banking sector.
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