Credit Suisse (Free)

The bail-in option

There’s also the possibility that the liabilities of the bank, like deposits and bonds, could be used to re-capitalize the bank (this may be the main option under Swiss law). This would constitute as an option #4.

However, it would likely to lead to a increased contagion, where investors would try to get rid of all bank debt, because they would risk losing it in a “bail-in” if the bank fails (and because no one would know which bank would be next). This would lead to increasing stress in the interbank markets and into deepening crisis. This is why we think this option will be avoided, if possible.

The next few days will be crucial.

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