Credit Suisse to strengthen capital via various funding sources
Credit Suisse is reportedly in the early stages of considering options to increase capital after a series of losses that have eroded its financial reserves. It was reported that the amount of the increase could exceed CHF 1 billion (US $1.04 billion), but it has not yet been determined. Cash infusions are expected to help Switzerland's second-largest bank recover from billions of losses in 2021 in addition to a series of costly legal issues.
Per reports, Credit Suisse has not ruled out the use of all shareholders, although selling shares to some of the major existing investors is said to be a preferred option. Others said it could sell business segments such as Credit Suisse's asset management division. However, the bank stated that it has not yet decided on any possible actions. Additionally, Credit Suisse said in a statement that it is not currently considering raising additional equity.
Credit Suisse is allegedly suffering from billions of losses accumulated from failed investments in 2021 and the fallout from several proceedings, including a court case in Bermuda, which can cost about $600 million.
Reports indicate that the bank has attempted to reform their risk management principles in response to a series of scandals. This has led to repeated management restructurings and sudden departures, in addition to various internal and external investigations. According to reports, Credit Suisse’s shares have fallen by more than a fifth over the past year, and their debt ratings were downgraded by Fitch and Standard & Poor’s.
The Swiss Financial Market Supervisory Authority (FINMA) marked Credit Suisse at the lowest possible grade of 4 in their annual assessment of large Swiss banks, unchanged from 2021.
The deliberation on the capital increase occurred just one year after the Swiss bank raised approximately CHF 1.75 billion from investors through mandatory convertible bonds, reports state. Furthermore, Credit Suisse downplayed the need for new capital in April 2022, even though it reported first-quarter losses, exacerbating financial difficulties.
Executives from Credit Suisse commented that the bank could continue to spend significantly on compliance and risk and that capital could remain constrained over the next six months. Additionally, the banks' Tier 1 capital ratio fell from 14.4% at the end of 2021 to 13.8% at the end of the first quarter of 2022.A new capital increase could strengthen Credit Suisse's balance sheet and send a positive signal.
Crypto venture capital investment likely to decline this year per Morgan Stanley
Morgan Stanley reported on Tuesday that cryptocurrency companies raised a record US $30 billion in venture capital (VC) in 2021, and the number of transactions in this sector remain high, despite the recent decline in the crypto market. However, the report said that trading activity is likely to decline, reflecting trends in other VC categories.
Reports indicate that the number of investments in VC cryptocurrencies peaked in December 2021, although a slowdown is expected as activity from eight major VC markets over the last 12 months has reset by 50% from its peak.
Venture capital is defined as a form of private equity investment that funds start-ups and SMEs with high growth potential. The press release stated that abundant “US dollar liquidity and soaring crypto prices have fuelled record VC investments in the industry with more than 1,800 transactions over the past year, 160% increase over the previous year's average.” Investment in crypto is reported at 7% of all venture capital investment around the world.
According to Morgan Stanley’s timeline, most investments were in crypto infrastructure and financial services at the start of 2020. Decentralized finance (DeFi) applications (umbrella term used for lending, trading and other financial activities carried out on a blockchain, without traditional intermediaries) was preferred in late 2020 into mid-2021, while non-fungible-tokens (NFTs) and gaming companies have gained the most momentum during the end of 2021 to current 2022.
New payment options for SMEs through Visa and Fundbox alliance
Visa, a global digital payments provider, announced that it has partnered with Fundbox, an embedded working capital platform for small to medium enterprises (SMEs), to empower the Fundbox platform with digital payments.
The press release stated that the alliance will first launch the Fundbox Flex Visa debit card issued by Pathward, N.A., to help small business customers better manage their cash outflows. Secondly, the partnership is said to be launching a series of innovative payment solutions in the next few months, such as BNPL for SMEs looking for flexible payment options, a push-to-card transfer option for instant fund disbursement, and a real-time money movement network.
Jack Forestell, Chief Product Officer, Visa, commented that, "As Visa continues to work towards digitally enabling 50 million small businesses by 2023, we’re excited to be teaming up with Fundbox to bring a range of new, digital offerings to the market from cards to installments to disbursement."
Fundbox Flex Pay is a spend management solution that reportedly helps business owners manage their accounts payable while providing flexibility on funding their expenses. It was reported that Fundbox’s payment volumes have been increasing by more than 80% on a quarterly basis. Additionally, Fundbox's annual revenue has exceeded US $160 million due to their approach of embedding their working capital solutions into the client's systems and workflows along with the growing desire of people to build their own efficient businesses.
With the latest US Census data showing a record of 5.4 million new business applications submitted last year, small business owners are increasingly turning to digital payments to support growth and prosperity.
According to Visa's Global Back to Business Study, 73% of SMEs surveyed see acceptance of new payment methods as the basis for business growth, and 59% are currently using digital payments or plan to within the next two years.
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