Rumors: Too Big to Fail Banks on the Brink of Collapse


Credit Suisse and Deutsche Bank are reportedly on the verge of collapse. They have 2.7 trillion in assets under management between them. It’s three times the assets of Lehman at the time of the collapse.

On 15 September 2008, Lehman Brothers, a bank considered ‘too big to fail,’ filed for insolvency. It was the single largest bankruptcy filing in the history of the US. At the time, the bank had $639 billion in assets and $619 billion in debt.

Credit Suisse and Deutsche Bank are too big to fail. Some say Deutsche Bank will be okay, but Credit Suisse is the one that is in big trouble.

Trading View Engineer Rajat Kumar Singh writes:

If the banks can’t pay off their debts i.e., they become insolvent and have to sell off their assets.

If the prices of these assets fall below a certain level, the other banks too will have to start selling to avoid the forceful margin calls on their positions.

This massive deleveraging event will create a domino effect due to mass selling, and this economic crisis will spread from one market/region to another, known as Contagion.

The German government might move to save Deutsche because it’s the biggest bank in Germany. But the size of the bailout is a matter of concern.

SMH.Au writes:

Credit Suisse’s new chief has asked investors for less than 100 days to deliver a new turnaround strategy. Turbulent markets are making that feel like a long time.

The cost of insuring the firm’s bonds against default climbed about 15 per cent last week to levels not seen since 2009 as the shares touched a new record low. Chief executive officer Ulrich Koerner reassured staff that the bank has a “strong capital base and liquidity position” and told employees that he will be sending them regular updates until the firm announces a new strategic plan on October 27. Koerner said the bank is facing a “critical moment.”

Sweeping changes are coming. Credit Suisse will have to go through a painful restructuring. Deutsche Bank is already delivering and is benefitting from interest rate tailwinds.

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