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Credit Suisse Crisis = 2008 Lehman Crash?

The ongoing Credit Suisse crisis is a hot topic of discussion and the speculations that the Zurich-based bank could fail have invoked frequent comparisons to the housing crisis that happened in the US in 2008.

The 2008 Lehman collapse precipitated one of the worst economic crises. It was a Mortgage-Backed Securities crisis wherein the housing market fell apart because of the issuance of excessive subprime loans. As a result, people didn’t pay their loans and the housing crisis busted which triggered a domino effect and impacted all the other banks as well and ended up with the entire Financial System crashing.

The Credit Suisse crisis on the other hand is an internal bank crisis, the fall in the stock price of Credit Suisse dates back to 2017 and the bank’s trouble has been some time in the making which can be attributed to a number of reasons ranging from issues within the management to the European lender giving loans to companies like SoftBank.

Economic analysts have also dismissed the comparisons to 2008 because-

  • Despite the Swiss lender’s woes, it has huge amounts of capital to withstand any losses.

  • The global financial environment has changed significantly since Lehman Brothers went bankrupt.

  • Banks are more tightly regulated and better capitalized than they were in 2008.

  • Citibank analysts have noted that Credit Suisse’s liquidity coverage ratio is among the “best in class” at 191%.

  • Their CET 1 ratio is 13.5% whereas the minimum ratio to maintain as per the Basel Norms is 8%

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