Fintech CEO: Credit Suisse Troubles Indicative of Broader Bank Issues

This week, Moody’s Investors Service announced that it expected losses for Credit Suisse to mount to $3 billion, which could drop core capital below 13%. If the bank’s core capital ratio stayed below 13%, it would fall into the credit negative category. The bank has been mired in controversy, with both S&P Global and Moody’s holding a negative outlook.

“The current market environment is not supportive of restructuring and is not supportive of Credit Suisse’s current capital market business model,” Alessandro Roccati, Senior Vice President of the financial institutions group of Moody’s. “Deteriorating market conditions have affected the potential realisation value of businesses they were considering to sell.”

“While the bank’s current position in terms of liquidity isn’t overly weak, it looks like Credit Suisse will be offering up a fresh set of write-downs at the end of the month. How will its solvency look then? That’s a big question for Credit Suisse, but there are indicators that issues exist across the industry,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“There’s a lot of talk about the bank splitting up, but challenges even exist there. Its American businesses were focused on leverage finance, which was a cash cow while the Fed offered historically low interest rates. Now that rates are increasing significantly, the business won’t be able to show the same profits, even in the very best of circumstances,” said Gardner.

“I wouldn’t be surprised to see a bank selloff coming in the extreme near-term, maybe even as soon as next week. Credit Suisse isn’t alone in its predicament. The Bank of England confirmed that UK pensions almost collapsed. Since the bond market is taking away the printing press from the central banks, we’re about to see a major shakeup,” said Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“Credit Suisse is in a particularly dire situation, given the issues they’ve had even before the interest hikes began. Last year, they were whacked with $5.5 billion in losses from the default of Archegos Capital Management, as well as supply chain finance funds linked to Greensill,” noted Gardner.