Cuckoo clocks and great painters

“In Italy, for thirty years under the Borgias they had warfare, terror, murder and bloodshed, but they produced Michaelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace – and what did that produce? The cuckoo clock.” (Orson Welles as Harry Lime in ‘The Third Man’).

Well, wind forward a few years and add to that list: a very hand $54 billion lifeline from the Swiss Central Bank to Credit Suisse. Nice work if you can get it, I say.

Events have been moving so fast this past week in the banking world that by the time you read this there might be more movement in the incredibly volatile stock that has been Credit Suisse, and much worse, more movement by jittery depositors. 

Well, let’s hope not too much, and however much it may gall some observers, that the intervention by the Swiss Central Bank has been enough to steady the ship.

Why? Because as sudden and concerning as the collapse of Silicon Valley Bank was, that will be as nothing compared to a sinking of the Credit Suisse ship, which is one of just 30 global financial institutions designated as being systemically important by the international Financial Stability Board. Simply put: too big to fail.

How big? Credit Suisse had total assets of $574 billion at the end of 2022,  down 37% from $912 billion at the end of 2020. Its asset-management arm supervises another $1.7 trillion in assets. Those numbers dwarf anything seen at Silicon Valley Bank, which had total assets of $212 billion.  Yes, the numbers will be lower today, but we’re still talking of a major financial institution. And as the (re)insurance will not need reminding given the problems of 2008-10, the repercussions of such a body going under would be very nasty indeed.

Now, all we need is for interest rates to hold steady by the European Central Bank. Wait, what was that?

Marcus Alcock, Editor

Emerging Risks