Saudi Arabian Crown Prince Mohammed to Invest $500 Million in Crisis-Hit Credit Suisse - Report

Saudi Arabia is readying a huge investment in scandal-hit Swiss bank Credit Suisse, according to reports. The Wall Street Journal reported that the Gulf Kingdom’s Crown Prince Mohammed bin Salman will invest as much as $500 million in the embattled bank.

The Credit Suisse crisis was dealt left a $5 billion dent on its portfolio following the collapse of Archegos Capital Management last year.

Prince Mohammed’s investment will go into Credit Suisse’s investment arm CS First Boston spinout, the WSJ said, citing people with knowledge of the matter. It was also reported that former Barclays Plc chief executive Bob Diamond’s Atlas Merchant Capital will also invest in the bank.

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In October, it was reported that the Middle East’s major sovereign wealth funds were exploring the option of funneling money into the investment bank business of Credit Suisse. Abu Dhabi’s Mubadala Investment Co. and Saudi Arabia’s Public Investment Fund were separately holding discussions with Credit Suisse, Reuters had reported.

Interest From Middle East

Reports said Middle Eastern nations were looking to seal a deal, taking advantage of the depressed value of Credit Suisse assets. Neither Credit Suisse nor the Gulf sovereign wealth funds had confirmed the move. “We have said we will update on progress on our comprehensive strategy review when we announce our third quarter earnings … It would be premature to comment on any potential outcomes before then,” Credit Suisse had said in a statement then.

The Credit Suisse Scandal

The first major shock for Credit Suisse was the bankruptcy of Greensill, a British supply chain company to which the Swiss banking major was heavily exposed. When Greensill filed for bankruptcy in 2021, Credit Suisse lost a whopping $10 billion of its investor money.

The second crisis to hit Credit Suisse later in the same year was the unraveling of Archegos Capital Management, which was promoted by Bill Hwang. While Hwang managed $10 billion, he convinced Credit Suisse and other banks to approve a $30 billion investment.

The crisis unfolded when Archegos engaged in the fire sale of about $20 billion of assets after it defaulted on a margin call by Credit Suisse and others. Shares of Nomura and Credit Suisse plunged, erasing a combined $9 billion in market value on the back of the market chaos following the collapse of Archegos Capital Management. Major investment banks like Deutsche Bank, UBS, Morgan Stanley, Goldman Sachs etc were also hit by the liquidation of Archegos.

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