Will Credit Suisse declare bankruptcy before the end of 2023?

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Mason avatar

Credit Suisse's future is dire,
Their bankruptcy could soon transpire,
Their finances are in the mire,
Will they go down in financial fire?

pizzzzzza avatar
PizzaPartybought Ṁ50 of NO

Hi, it looks like UBS is going to buy CS. You can resolve this market

MaxPayne avatar
Max Payne

@AlbertoM It doesn’t seem like UBS will dismantle CS. If it continues to exist, it might still go bankrupt later this year.

Endovior avatar
Endovioris predicting YES at 12%

It appears that, at the behest of Swiss regulators, Credit Suisse will soon be broken up, with UBS being paid to take over at least part of it. "The bank was dismantled, and a rival bank had to be paid to take over its assets" certainly sounds bankruptcy-equivalent, and that more or less tracks with the other recent bank failures. Your thoughts on market resolution under those conditions, @SG?

jack avatar
Jackis predicting NO at 21%

@Endovior If a company is purchased by another company, even under very distressed circumstances, that is usually still not bankruptcy. On the other hand, if the bank was liquidated, assets were sold off to pay creditors, and the company's shares were wiped out, that would be basically akin to bankruptcy.

EricG avatar
Ericbought Ṁ100 of YES

What about if the bondholders suffer losses because the company shares are not converted, ie into UBS stock?

MP avatar
MPis predicting NO at 4%

definitely not a bankruptcy. Anyone who disagrees, I challenge you to find a mainstream media outlet reporting this as being bankruptcy equivalent

chrisjbillington avatar
Chris Billingtonis predicting NO at 4%

@Endovior I'm seeing it reported that UBS is paying 3B CHF for it, not being paid to take it on. Shareholders not being wiped out = not bankrupt.

Endovior avatar
Endovioris predicting YES at 4%

@jack If this was a normal sale that CS voluntarily sought out, I'd agree... but CS is being forced to sell to UBS by Swiss regulators.

@chrisjbillington UBS is putting in 3 billion, yes, but the Swiss government have also agreed to give UBS 9 billion in compensation to cover expected losses:


That, combined with the way shareholders and bondholders are being wiped out, implies that the company is worth something like negative 6 billion dollars.

chrisjbillington avatar
Chris Billingtonis predicting NO at 4%

@Endovior I see. Yes, that's pretty interesting. Strange that the shareholders would be paid before others...

BTE avatar
Brian T. Edwardsis predicting NO at 4%

@chrisjbillington Doesn't appear that they are acquiring the entire book. Just select units of the company, right?

jack avatar
Jackis predicting NO at 4%

@Endovior Unless I missed something, I don't see where in the link supports what you're saying. The shareholders aren't being wiped out - they are certainly getting less for their shares than they were last week, but it is a positive amount. And the article mentions nothing about bondholders being wiped out - bondholders are before shareholders in line, so they aren't wiped out, unless something very strange happened.

jack avatar
Jackis predicting NO at 4%

Also: The Swiss government has provided guarantees of up to 9 billion Swiss francs to underwrite the takeover. They are not paying UBS money now. They are backstopping it in case there are losses. Very important distinction.

jack avatar
Jackis predicting NO at 4%

Ah, $17bn of Credit Suisse bonds are being written down to zero: https://www.ft.com/content/d1ae9a54-c4a7-4742-8b2d-afff549f4f95. This is a rather unusual (I think) step imposed by the Swiss regulators, apparently.

BTE avatar
Brian T. Edwardsis predicting NO at 6%

@jack I feel like this deal couldn't happen like this in the US. how do bondholders get wiped out but not shareholders. Usually the order is reversed, right?

jack avatar
Jacksold Ṁ1,896 of NO

@BTE Yes, bondholders get their money back before shareholders is normally how it works.

jack avatar
Jackis predicting NO at 5%

Found out some more info that sheds some light on this. Seems like CS ordinary bonds are fine, only special AT1 bonds are being wiped out - AT1 bonds have a provision that allows them to be converted to equity capital.


The second trade that investors plowed into was in Credit Suisse’s roughly $17 billion of so-called AT1 bonds. This is a special type of debt issued by banks that can be converted to equity capital should they run into trouble. This made that debt inherently riskier to hold, because it carried the chance that bondholders could be wiped out.

It said that the AT1 bonds would be wiped out as part of the deal, to add roughly $16 billion of equity to support UBS’s takeover.

That raised eyebrows among some investors because it upended the normal order in which holders of different assets of a company expect to be paid in bankruptcy. Stock investors are at the bottom of that repayment list and usually lose all their money ahead of other investors.

However, in this instance, regulators chose to trigger the conversion of the AT1 bonds to equity capital to help the bank, while still offering Credit Suisse shareholders one UBS share for every 22.48 Credit Suisse shares held.

TobiasHaeberli avatar
Tobias Häberliis predicting YES at 5%

@jack I'm a bit confused about the situation and not well-informed.

The Swiss government is giving a $9 billion guarantee for potential losses from assets UBS is taking over, and the price that UBS is paying is roughly $3 billion.
Doesn't this imply something about the UBS and the Swiss government thinking it quite likely that Credit Suisse might indeed turn out to have been insolvent?

If in the future the Swiss government pays UBS $6 billion because of Credit Suisse liabilities, would this be reason to think that the market should resolve positively?
What about if the Swiss government or UBS straight up say something like "in March 2023, Credit Suisse was insolvent"?

TobiasHaeberli avatar
Tobias Häberliis predicting YES at 5%

@TobiasHaeberli @jack
It seems that the SNB can only give "Emergency Liquidity Assistance" if the financial regulator (FINMA) deems them solvent.
"Emergency liquidity assistance is provided only if the bank or group of banks seeking credit is of importance for the stability of the financial system and is solvent, and if the liquidity assistance is covered by sufficient collateral at all times." (SOURCE)

So the SNB offering Emergency Liquidity Assistance points towards FINMA finding CS solvent.

jack avatar
Jackis predicting NO at 5%

I think in general, there is a lot of uncertainty about the value of a bank's assets, a wide confidence interval, plus they fluctuate with market conditions. So the backstop is to help protect UBS in case of outcomes on the lower end of the confidence interval.

CS's AT1s have a rule that if the bank's equity capital ratio falls below 7%, then the AT1 is written down to zero. Notably, the threshold is 7%, not 0%. Seems like that is what happened, so that's why AT1s can be zeroed while the common stock is not zeroed.

Matt Levine explains it well here: https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-got-credit-suisse-for-almost-nothing

> The AT1s are junior to the common stock. Not all the time, and there are scenarios (instant descent into bankruptcy) where the AT1s get paid ahead of the common. But the most basic function of the AT1 is to go to zero while the bank is a going concern with positive equity value, meaning that its function is to go to zero before the common stock does.

> The Credit Suisse AT1 securities are getting zeroed. This is not, to be clear, exactly because Credit Suisse’s CET1 capital fell below 7%; instead, there is a separate clause of the AT1s allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.”

Here, CS did not instantly descend into bankruptcy, so the AT1s were zeroed while the common stock was not. The AT1s were zeroed to prevent CSG from becoming insolvent, bankrupt, or unable to pay its debts.

mvdm avatar
mvdmbought Ṁ200 of NO

"UBS is in discussions to take over all or part of Credit Suisse, with the boards of Switzerland’s two biggest lenders set to meet separately over the weekend to consider what would be Europe’s most consequential banking combination since the financial crisis, according to multiple people briefed on the talks."

Endovior avatar
Endoviorbought Ṁ100 of YES

@mvdm Given that UBS is apparently demanding six billion dollars to allow it to handle the winding down of the acquired business, that sounds like Credit Suisse is worth... negative six billion dollars?

jack avatar
Jackbought Ṁ500 of NO


Stock dropped a ton this morning because Saudi National Bank stated they could not go above 10% ownership due to regulatory issues:

The immediate catalyst for a perilous drop in the bank’s stock on Wednesday was a comment by Ammar al-Khudairy, the chairman of the Saudi National Bank, the bank’s largest shareholder. In a televised interview, Mr. al-Khudairy said the state-owned bank would not put more money into Credit Suisse. He later clarified that his bank would not go above the 9.9 percent it already owned because of regulatory issues.

Then the Swiss central bank said it would support Credit Suisse:

After the close of trading in Europe, Switzerland’s central bank, the Swiss National Bank, said it would step in and provide support to Credit Suisse “if necessary.”

dreev avatar
Daniel Reevesis predicting NO at 14%

From googling around, I'm seeing "as high as 1200 basis points on one-year senior credit-default swaps" as of this morning for Credit Suisse. Which, if I understand all this, which is not even remotely the case, means the real-money markets put this probability at 12%. I guess this Manifold market is for Credit Suisse defaulting in the next 9.5 months so should be a bit less than the one-year version?

MP avatar
MPis predicting NO at 18%

@dreev it is significantly higher, because a CDS only covers the part of the loan creditors don't get back

dreev avatar
Daniel Reevesis predicting NO at 13%

@MP You're saying Credit Suisse can go bankrupt without defaulting on its loans? How would that play out? Or have I misunderstood?

jack avatar
Jackbought Ṁ0 of NO

@dreev Defaulting on loans doesn't mean paying out zero on them E.g. SVB's debt was still trading at 30 cents on the dollar on Friday after SVB was closed by the FDIC. In a case like that, CDS would pay out the difference (70 cents).

MP avatar
MPis predicting NO at 13%

@jack When you buy a CDS, you're buying the difference from par of a bond that defaulted. Therefore if CS defaults (and the CDS will certainly have a precise definition of what default means), a defined period later it will conducted an auction of the bond. If it comes at sat 30c, the party that sold the CDS pays 70c. Pay attention that how much it's actually recovered by CS creditors doesn't matter, only the market expectations after the default

dreev avatar
Daniel Reevesis predicting NO at 21%

@MP @jack Thanks y'all! So the CDS is 1-x where x is how many cents on the dollar Credit Suisse's debt is worth in expectation? That was apparently 88 cents on the dollar this morning (CDS at 0.12). In a universe where Credit Suisse's debt is either worth 100 cents on the dollar or 0 cents on the dollar, that would imply a 12% chance of default/bankruptcy. But the CDS price is also consistent with a universe where Credit Suisse is 100% going to default and when it does, we know that creditors will recover 88 cents on the dollar.

Have I got that right? If so, is there another way to reason about the actual probability of default/bankruptcy?

MP avatar
MPis predicting NO at 18%

@dreev yes, blooming will present base rates of recovery. People smarter and richer than me were using a 40% recovery

dreev avatar
Daniel Reevesis predicting NO at 17%

@MP Blooming? And does "40% recovery" mean 60% for this market?

dreev avatar
Daniel Reevesbought Ṁ289 of YES
chrisjbillington avatar
Chris Billingtonbought Ṁ100 of YES

Does being insolvent and getting taken over by regulators or whatnot count for a YES resolution, @SG?

SG avatar
S Gbought Ṁ50 of YES

@chrisjbillington Yes, it will. Should have clarified this after problems with my other market. I will interpret "bankruptcy" in a commonsense manner in line with my total lack of knowledge of Swiss banking law.

CarsonGale avatar
Carson Galeis predicting NO at 27%

@SG What about a bailout by the Swiss government where it is unclear as to whether CS would ultimately need to go "bankrupt" in any sense of the term

SG avatar
S Gis predicting YES at 17%

@CarsonGale A bailout will only count if there is a crisis and the bank would be insolvent if immediate action weren't taken. If the bank is given government support in a time of non-crisis when CS's finances look dicey but not on the brink of collapse (such as today), it wouldn't count.

TobiasHaeberli avatar
Tobias Häberlibought Ṁ200 of YES

Financial Times reporting:
"Credit Suisse has appealed to the Swiss National Bank for a public show of support after its shares cratered as much as 30 per cent, sparking a broader sell-off in European and US bank stocks.
Finma [financial regulator] did not immediately respond to a request for comment; the Swiss National Bank and Credit Suisse declined to comment."

jack avatar
Jackbought Ṁ1,000 of NO

The options market is pricing the chance of CS going to zero extremely low.

jack avatar
Jackis predicting NO at 15%

The pricing went up a lot today after the news that Saudi National Bank can't provide more financing due to regulations: https://www.cnbc.com/2023/03/16/stock-markets-credit-suisse-spreads-the-banking-crisis-to-europe.html

MP avatar
MPis predicting NO at 26%

Can banks declare bankruptcy in Swiss?

TobiasHaeberli avatar
Tobias Häberlibought Ṁ25 of YES

@MP Generally, I think so.
The UBS was bailed out in 2018 (https://www.swissinfo.ch/eng/business/2008-crisis_the-day-ubs--the-biggest-swiss-bank--was-saved/44474630).
But since then, the government tried to implement "too big to fail" policies that should ensure that banks can go bankrupt without as much negative effects as the government expected in 2008.

TobiasHaeberli avatar
Tobias Häberliis predicting YES at 23%

@TobiasHaeberli The Swiss national bank categorizes Credit Swiss as a "systemically important" bank. Which means that they have to meet more financial requirements than other banks. Specifically: "hold higher capital and liquidity buffers and maintain recovery and emergency plans".

MP avatar
MPbought Ṁ0 of NO

@TobiasHaeberli Our SVB bank was solved to N/A because banks don't bankrupt in America

CarsonGale avatar
Carson Galebought Ṁ70 of NO

@Endovior we'll see. I work for a competitor and my understanding from people in the know is that this is pretty unlikely. I think the chance of bankruptcy is somewhat correlated with market conditions generally.

Endovior avatar
Endoviorbought Ṁ100 of YES

Buying more of this. The real-world market doesn't place much value on their shares, which ought to inform the behaviour of fake internet markets.


belikewater avatar
belikewaterbought Ṁ64 of YES

@Endovior And the market is not very impressed with the Saudi crown prince's pledge to invest, either.

Endovior avatar
Endoviorbought Ṁ200 of YES

Buying more of this in response to a series of bad news articles about Credit Suisse:




Between large fines for fraud, and C-suite execs jumping ship, the news doesn't look good for them. The B-word isn't in the news just yet, but it's not a positive sort of direction, and there's plenty of time left for them to get there and fulfill this market.

NicholasCharette73b6 avatar
Nicholas Charetteis predicting YES at 20%

It's my perception that significant amounts of funds are moving out of CS right now due to worries about counterparty risk. So even if CS is somewhat okay right now, fears about it could be a self-fulfilling prophecy.

CarsonGale avatar
Carson Galeis predicting NO at 20%

@NicholasCharette73b6 I've seen a large number of folks from the banking side leaving to other firms due to the declining reputation.

SG avatar


NicholasCharette73b6 avatar
Nicholas Charettebought Ṁ10 of YES

@SG Also see CDS for Credit Suisse priced at ~250

NicholasCharette73b6 avatar
Nicholas Charetteis predicting YES at 22%