Credit Suisse Effectively Closing Its VIX, Gold And Silver ETNs

David Dierking

Credit Suisse announced earlier this week that it plans to delist its lineup of exchange-traded notes (ETNs) and suspend any further issuances of new shares.

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The move comes as a bit of a surprise to some considering the 9 ETN lineup holds roughly $3 billion in total assets, about half of which comes from the VelocityShares Daily 2x VIX Short-Term ETN (TVIX).

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Why would Credit Suisse want to get out of the ETN business altogether? On the surface it seems like a bit of an add strategy given that the bank generates more than $20 million in fees annual on the products.

The official company line from its press release:

Credit Suisse AG has decided to delist the foregoing ETNs with a view to better align its product suite with its broader strategic growth plans.

That's a fairly boilerplate response. I'm sure that's probably part of the reason, although it disguises the real reason they wanted to make the move.

My opinion is that Credit Suisse is struggling financially along with the rest of the European banking sector. Since these ETNs are essentially bond-like instruments, there's counterparty risk involved in case things go sideways. If volatility spikes (or the prices of any of these underlying assets), the bank could be on the hook unless the risk is properly hedged on the other side.

In that scenario, Credit Suisse exposes itself to a fair amount of risk. Given their current challenges, it may be a risk they no longer want to take, especially if there's a second COVID wave that grinds the global economy to a halt again.

Credit Suisse plans on delisting the ETNs on July 12th.

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