What happened to Credit Suisse and Silicon Valley Bank?

Over the past 2 years, Credit Suisse has had its stock price drop by over 90%, and Silicon Valley Bank has completely folded, but why is this?

Credit Suisse had its stock price drop from almost $15 to under $1 from 2021 to May of 2023 . It was on the brink of collapse and required a $54 billion lifeline from the Swiss central bank to prevent it from folding, meaning to close down. Credit Suisse was the 2nd largest bank in Switzerland and was bought out by rival UBS, a major investment banking company, for $3.3 billion USD.

A main factor in the downfall of Credit Suisse is the many scandals they faced. In 2019, Credit Suisse faced a spying scandal leading to then CEO Tidjane Thiam resigning. This was the start of their downfall. Over the next couple of years, Credit Suisse continued to have scandals and management shifts that led to them collapsing. In January 2023, Credit Suisse said that it will borrow up to $54 billion to shore up liquidity in the bank, but failed to do so with its top backer, Saudi National Bank, refusing to give money. Soon after, UBS took over Credit Suisse.

In March 2023, Silicon Valley Bank completely collapsed. They will not be receiving a government bailout and will have its assets distributed across creditors unless a buyer scoops up the bank. The decline of Silicon Valley Bank was due to a run on the bank where many depositors withdrew money after finding out the bank was short of capital, leading to the bank not having enough money. Since SVB customers tended to have large accounts, it was only 2 days after they found out that the bank was short on capital that the $200 billion bank collapsed.

While these crashes aren’t expected to be the start of a market crash, they need to be noted. Credit Suisse and Silicon Valley Bank ultimately had different reasons for their downfall, but it teaches a lesson on how banks may need to be more careful in their decision-making. Both banks were some of the largest in their respective countries and their collapse will have a major impact on the banking industry and global economics. Society needs to be more careful with the banks that are being used, and banks need to reconsider their financial system. Banks have to keep up with the tough task of maintaining growth while keeping inflation under control.

Work Cited

Guardian News and Media. (2023, March 13). Silicon Valley Bank: Why did it collapse and is this the start of a banking crisis? The Guardian. Retrieved April 16, 2023, from https://www.theguardian.com/business/2023/mar/13/silicon-valley-bank-why-did-it-collapse-and-is-this-the-start-of-a-banking-crisis

Person, & Daga, A. (2023, March 18). What happened at Credit Suisse and how did it reach crisis point? Reuters. Retrieved April 16, 2023, from https://www.reuters.com/business/finance/credit-suisse-how-did-it-get-crisis-point-2023-03-16/

Reiff, N. (2023, April 5). What happened at Credit Suisse, and why did it collapse? Investopedia. Retrieved April 16, 2023, from https://www.investopedia.com/what-happened-at-credit-suisse-and-why-did-it-collapse-7369825