Credit Suisse deal relief dissipates as focus shifts to bond risks | – #Credit #Suisse #deal #relief #dissipates #focus #shifts #bond #risks
20 March (Reuters) – After initial relief over the historic state-backed rescue of troubled lender Credit Suisse by Swiss rival UBS Group sparked fresh concerns about high-yield debt exposures from big banks bank shares fell on Monday.
In a package arranged by Swiss regulators on Sunday, UBS Group AG ( UBSG.S ) said it would buy 167-year-old Credit Suisse Group AG ( CSGN.S ) 3 billion Swiss franc (3.23 billion dollars) will pay and 5.4 billion to the dollar credit will take losses.
Risking a rapid loss of confidence in the financial system, major central banks also scrambled on Sunday to bolster cash flows around the world with a series of coordinated currency swaps to ensure banks have the dollars they need to operate. .
While those developments bolstered investor confidence in early Asian trade, the rally quickly evaporated as attention turned to the massive hit some Credit Suisse bondholders would take from the UBS acquisition.
Under the deal, the Swiss regulator ruled that Credit Suisse’s $17 billion in additional senior bonds – or AT1 bonds – would be zero-rated, angering some of the debt holders who said they would be better protected. The shareholders in the purchase agreement were announced on Sunday.
Concerns about what this could mean for holders of AT1 bonds issued by other banks include contagion, USAIt has raised persistent concerns about the fragile state of its regional banks and a number of other risks, including moral hazard.
Shares in Standard Chartered Plc and HSBC each fell more than 6% in Hong Kong on Monday to their lowest in more than two months, with HSBC facing the possibility of posting its biggest one-day decline in six months. MSCI’s index of financial stocks in Asia ex-Japan (.MIAX0FN00PUS) fell 1.3%.
“Obviously, more than a week bank After the panic and two interventions organized by the authorities, this problem does not go away. On the contrary, it has become global,” said Mike O’Rourke, chief strategist of the market. , Jones Trading.
“The news that UBS is taking over Credit Suisse is likely to add to Credit Suisse’s woes by moving it to UBS.”
RELATED ACTIVITY
A marriage of Swiss banking with a shotgun, 20The largest since the collapse of Lehman Brothers in 2008 bank backed by a large government guarantee that helped prevent one of its bankruptcies.
Pressure on UBS helped close the deal on Sunday.
“This is a historic day in Switzerland and frankly, we hoped it wouldn’t come,” UBS Chairman Colm Kelleher told analysts on a conference call. “I want to make it clear that while we have not entered into discussions, we believe this transaction is financially attractive to UBS shareholders,” Kelleher said.
UBS CEO Ralph Hamers said there were still many details to be worked out.
“I know there must be questions we still can’t answer. “And I understand that, and I even want to apologize for that.”
In a global response not seen since the height of the pandemic, the Fed said it was joining central banks in Canada, Britain, Japan, the EU and Switzerland in a coordinated move to boost market liquidity. Europe Switzerland’s central bank pledged to support euro zone banks with loans if needed, adding that the rescue of Credit Suisse was “instrumental” in restoring calm.
Banking operations at Credit Suisse’s main offices in Asia were business as usual on Monday.
Monetary authorities in Singapore and Hong Kong, where Credit Suisse’s major regional offices are located, separately said the Swiss bank’s business continued without interruption.
And Credit Suisse urged its employees to go to work, according to a memo to employees seen by Reuters.
RESOLVED ISSUES
30 billion to First Republic Bank (FRC.N), rocked by the failures of several major banks, Silicon Valley and Signature Bank (SBNY). dollars that bank stocks remain under pressure despite depositing USA problems remain in the banking sector. O).
Sunday, First Republic credit saw its ratings downgraded deeper to junk status by S&P Global, which said the deposit infusion could not solve its liquidity problems.
There are also concerns about what happens next at Credit Suisse and what it means for investors, clients and employees.
Credit Suisse said in a note to staff that after a full takeover of wealth management, clients may want to move some of their assets to another bank if concentration is a concern.
The deal would also make UBS Switzerland’s only global bank and the Swiss economy even more dependent on a single lender.
“The collapse of Credit Suisse will have serious consequences for other Swiss financial institutions. A nationwide reputation for prudent financial management, sound regulatory oversight and, frankly, being a bit dull and boring about investments has been erased,” Octavio said. Marenzi, CEO of Opimas, Vienna.
UBS chairman Kelleher said at a press conference that Credit Suisse’s investment bank with thousands of employees worldwide cancellation will do. UBS, about 7 billion in annual expenses until 2027 dollars he said he expects savings.
The Swiss central bank said that the deal on Sunday for UBS and Credit Suisse 100 billion Swiss francs ($108 billion) includes liquidity assistance.
Credit Suisse shares lost a quarter of their value last week. $54 billion from the central bank as it tries to recover from scandals that have undermined banking confidence funds was forced to separate.
($1 = 0.9280 Swiss francs)
Reporting by Stefania Spezzati, Oliver Hirt and John O’Donnell in Zurich; Additional reporting by Lananh Nguyen, Saeed Azhar and Hannah Langby and Reuters; Written by Nick Zieminski and Sam Holmes; Edited by Lisa Shumaker and Muralikumar Anantharaman
Our standards: Thomson Reuters Trust Principles.
Scott Murdoch
2023-03-20 10:40:39
Source – reuters
Translation“24 HOURS”