Credit Suisse’s five-year Credit Default Swap (CDS), is the cost of insuring the bank’s bonds. it rose to 574 basis points, a new record high.
The last time it was this high was around the 2008 financial crisis. Under the CDS, if a company defaults on repayment, the insurance company pays the amount. An increase in CDS means the likelihood of a debt default or rising problem in a company, and vice-versa.
According to Bloomberg, Credit Suisse has discussed ways to stabilize the bank with swiss authorities. It also reportedly asked the Swiss central bank to issue a statement of support to allay the fears of investors and clients. Credit Suisse announced it has arranged to borrow as much as 50 billion francs from the Swiss National Bank and is making a tender offer to buy back up to three billion francs of the dollar- and euro-denominated debt.
The short answer: Yes. Credit Suisse owns more than 200 billion rupees of assets in India, making it the 12th largest offshore lender, according to equity analyst Jefferies. Loans account for 73 per cent of its total liabilities in the South Asian nation, with the majority of them of a short tenure. Thus, with the sudden plunge in the bank share and its impact in the European market, concerns grew in India too.
However, India’s banking sector will likely have a softer impact from the troubles at Credit Suisse, given the Swiss lender’s relatively small presence in the country. Although, Jefferies mentioned that the impact of Credit Suisse will be comparatively more relevant to India than SVB crisis.
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