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☆ Swiss regulator says central bank loan to Credit Suisse justified AT1 bond writedown
▼ + stars: | 2023-03-23 | by ( Elliot Smith | ) www.cnbc.com time to read: +2 min

Swiss regulator FINMA on Thursday defended its decision to instruct Credit Suisse to write down its AT1 bonds — a controversial part of the lender's emergency sale to UBS — saying it was a "viability event." The regulator said the loan Credit Suisse received from the Swiss National Bank last week, backed by the federal government, meant the conditions for a writedown had been met. The regulator instructed Credit Suisse to write down 16 billion Swiss francs of AT1 bonds, widely regarded as relatively risky investments, to zero, while equity shareholders will receive payouts at the stock's takeover value. "As Credit Suisse received extraordinary liquidity assistance loans secured by a federal default guarantee on 19 March 2023, these contractual conditions were met for the AT1 instruments issued by the bank." The Swiss federal government enacted an emergency ordinance to guarantee the additional liquidity assistance from the SNB to Credit Suisse, in order to ensure the successful implementation of the UBS takeover.

Fed Chairman Jerome Powell sought to reassure investors about the soundness of the banking system, saying that the management of Silicon Valley Bank "failed badly," but that the bank's collapse did not indicate wider weaknesses in the banking system. "These are not weaknesses that are running broadly through the banking system," he said, adding that the takeover of Credit Suisse seemed to have been a positive outcome. The Federal Open Market Committee policy statement also said the U.S. banking system is "sound and resilient." The much-anticipated rate cut by the Fed, which had delivered eight previous rate hikes in the past year, sought to balance the risk of rampant inflation with the threat of instability in the banking system. The banking sector has been in turmoil after California regulators on March 10 closed Silicon Valley Bank in the largest U.S. bank failure since the 2008 financial crisis.

ZURICH—The chairman of Switzerland’s largest bank received an urgent call last week. UBS Group AG needed to rescue its failing rival, Credit Suisse Group AG. For Switzerland, the stakes verged on existential. Its economic model and national identity, cultivated over centuries, were built on safeguarding the world’s wealth. Switzerland itself needed rescuing.

☆ Credit Suisse Write-Off Upends European Bank Capital Bonds
▼ + stars: | 2023-03-22 | by ( Josh Mitchell | Anna Hirtenstein | ) www.wsj.com time to read: 1 min

Some $17 billion of riskier Credit Suisse bonds were written down to zero as part of its emergency takeover. Switzerland’s move to wipe out $17 billion of Credit Suisse Group AG bonds has prompted investors to reassess a market integral to the safety and resilience of Europe’s banking system. The Credit Suisse bonds that were written down as part of its takeover by UBS Group AG were known as AT1s, or Additional Tier 1 bonds. These instruments exploded in popularity in Europe over the past decade and were seen as a way to build buffers that could protect banks in times of trouble without having to tap taxpayer funds.

☆ UBS likely to shrink Credit Suisse's $10 bln shipping portfolio -WSJ
▼ + stars: | 2023-03-22 | by ( ) www.reuters.com time to read: +1 min

March 22 (Reuters) - UBS Group AG (UBSG.S) will likely shrink Credit Suisse Group's (CSGN.S) $10 billion shipping portfolio that it inherited as part of its emergency takeover on Sunday, the Wall Street Journal reported on Wednesday. UBS could also try to sell the portfolio, but doing so could prompt owners to move their accounts elsewhere, the WSJ reported, citing people familiar with the matter. About half of the shipping portfolio involves Greek ship owners that use their deposits in the bank's wealth management arm as collateral to finance new ships, the report added. Credit Suisse did not immediately respond to a request for comment. Swiss authorities announced last week that UBS had agreed to buy its rival Credit Suisse in a merger aimed at containing a crisis of confidence that was spreading through global banking.

Oil prices hit 15-month lows on Monday in response to the banking crisis that followed the collapse of two U.S. lenders and resulted in Credit Suisse being rescued by Switzerland's biggest bank UBS (UBSG.S). Falling oil prices are a problem for most of the group's members because their economies rely heavily on oil revenue. A third delegate said the recent slump in oil prices was related to speculation in the financial market, not market fundamentals. In its most recent monthly report, OPEC upgraded its forecast for Chinese oil demand growth this year but maintained its projection for global demand growth at 2.32 million bpd. Reporting by Ahmad Ghaddar, Maha El Dahan and Alex Lawler Editing by David GoodmanOur Standards: The Thomson Reuters Trust Principles.

NEW YORK, March 21 (Reuters) - Worries over the banking crisis are boosting disparate assets, with traditional safe-havens such as gold, Treasuries and money markets seeing high demand along with more speculative instruments such as tech stocks and bitcoin. The gains have come alongside big moves in assets traditionally perceived as safe-havens during uncertain times. Yields on shorter-dated Treasuries, which move inversely to prices, saw a historic drop last week, while money market funds notched their biggest inflows since April 2020 in the week to March 15, Refinitiv Lipper data showed. Well, the 10-year U.S. Treasury yield is down about 60 basis points from early March,” said Keith Lerner, chief market strategist at Truist Advisory Services, in a Monday report. Reporting by Lewis Krauskopf and David Randall; Editing by Ira Iosebashvili and Leslie AdlerOur Standards: The Thomson Reuters Trust Principles.

[1/2] The logo of the Swiss bank Credit Suisse is seen in Zurich, Switzerland March 20, 2023. While the nation's central bank and financial regulator publicly declared that Credit Suisse was sound, behind closed doors the race was on to rescue the nation's second-biggest bank. The Swiss National Bank declined to comment while the finance ministry did not respond to a request for comment. Battered by years of scandals and losses, Credit Suisse for months had been battling a crisis of confidence of its own making. By Wednesday, two days later, Credit Suisse was swept up in a full-blown crisis.

DUBAI—Riding an oil-price boom last year, Saudi Crown Prince Mohammed bin Salman directed government-backed Saudi National Bank to make a $1.5 billion investment in Credit Suisse Group AG that his financial advisers harbored doubts about, according to people familiar with the matter. Now, the Saudi investment is almost wiped out after Credit Suisse’s emergency merger with UBS Group AG. Credit Suisse’s meltdown also erased billions of dollars in investments made by Qatar’s sovereign fund and the Saudi-based Olayan family, making the Persian Gulf one of the biggest losers from a slide in financial stocks since the collapse of two U.S. banks last week.

California banking regulators on March 10 closed Silicon Valley Bank in the largest U.S. bank failure since the 2008 financial crisis. Kurt Gwynne, an attorney for the FDIC as receiver for Silicon Valley Bank, disputed at Tuesday's hearing that regulators had done anything improper. Destroyed SVB (Silicon Valley Bank) logo is seen in this illustration taken March 13, 2023. Glenn said he was prepared to allow SVB Financial to use up to $100 million for investment activity. Silicon Valley Bank was SVB Financial's largest asset, accounting for more than $15.5 billion of SVB Financial's $19.7 billion in total assets.

☆ Canada's banking regulator reaffirms creditor hierarchy after Credit Suisse deal angers bondholders
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +1 min

March 20 (Reuters) - Canada's banking regulator said on Monday that those who hold Additional Tier 1 (AT1) and Tier 2 debt will be entitled to a more favorable outcome if a bank runs into trouble. If a bank reaches the point of "non-viability", common shareholders of the bank will be the first to suffer losses, the Canadian regulator said. It means AT1 bondholders appear to be left with nothing while shareholders, who usually rank below bondholders in terms of who gets paid when a company collapses, will receive $3.23 billion under the deal. Lawyers from Switzerland, the United States and UK are talking to a number of Credit Suisse AT1 bond holders about possible legal action, law firm Quinn Emanuel Urquhart & Sullivan said on Monday. ($1 = 0.9285 Swiss franc)Reporting by Niket Nishant in Bengaluru; Editing by Shounak DasguptaOur Standards: The Thomson Reuters Trust Principles.

March 20 (Reuters) - Shares of U.S. lender First Republic tumbled nearly 50% on Monday on fears it will need a second rescue to stay afloat, bucking a broader rally in bank shares driven by UBS Group's state-backed takeover of Credit Suisse. "First and foremost, the Credit Suisse, UBS merger certainly takes a lot of stress out of the global banking system." The 3 billion Swiss franc ($3.2 billion) deal for the troubled Swiss bank - which was once worth more than $90 billion - was engineered by Swiss regulators and announced on Sunday. European bank shares (.SX7P) rebounded from recent losses, while on Wall Street the S&P 500 banks (.SPXBK) index recovered 0.6%. [1/2] Buildings of Swiss banks UBS and Credit Suisse are seen on the Paradeplatz in Zurich, Switzerland March 20, 2023.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) ended up 131.71 points, or 0.7%, at 19,519.43, preliminary data showed. The financial sector (.SPTTFS), which accounts for nearly 30% of the TSX, added 0.5%. Energy was up 2.9% as oil rebounded from a 15-month low. The materials sector, which includes precious and base metals miners and fertilizer companies, gained 0.8%. Reporting by Johann M Cherian in Bengaluru; Editing by Pooja Desai and David GregorioOur Standards: The Thomson Reuters Trust Principles.

FRANKFURT, March 20 (Reuters) - European supervisors tried to stop a rout in the market for convertible bank bonds on Monday, saying owners of this type of debt would only suffer losses after shareholders have been wiped out - unlike what happened at Credit Suisse (CSGN.S). Regulators in the European Union and Britain were reacting to a decisions by Swiss authorities to write off Credit Suisse's Additional Tier 1 (AT1) bonds even as stockholders received shares in UBS (UBSG.S). The EU regulators - the European Central Bank, the European Banking Authority and the Single Resolution Board - said they would continue to impose losses on shareholders before bondholders. The comments helped the price of bank bonds cut losses and were echoed by the Bank of England shortly after. Credit Suisse's AT1 bonds contained a clause allowing Swiss authorities to write them off if the bank became unviable, regardless of what happens to the shares.

In a package engineered by Swiss regulators on Sunday, UBS Group AG (UBSG.S) will pay 3 billion Swiss francs ($3.2 billion) for 167-year-old Credit Suisse Group AG <CSGN.S>, which was once worth more than $90 billion. European bank shares inched into positive territory (.SX7P) while shares in U.S. financial giants Citigroup (C.N) and JPMorgan Chase (JPM.N) rose 1.2% and 0.7% respectively. Investor focus had shifted to the massive blow some Credit Suisse bondholders will take, a new worry in a rolling banking sector crisis sparked by the collapse of midsize-U.S. lenders Silicon Valley Bank (SVB) and Signature Bank (SBNY.O) earlier this month. [1/2] Buildings of Swiss banks UBS and Credit Suisse are seen on the Paradeplatz in Zurich, Switzerland March 20, 2023. QUESTIONS FOR UBSThe deal to buy Credit Suisse will make UBS Switzerland’s only global bank and the Swiss economy more dependent on a single lender.

In a package engineered by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse Group AG (CSGN.S) and assume up to $5.4 billion in losses. Investor focus has now shifted to the massive blow some Credit Suisse bondholders will take, adding to anxiety about other banking sector risks including contagion and the fragile state of U.S. regional lenders. UBS acquiring Credit Suisse for 3 billion francs a week ago would have seemed like a terrific deal. Buildings of Swiss banks UBS and Credit Suisse are seen on the Paradeplatz in Zurich, Switzerland March 20, 2023. QUESTIONS FOR UBSThe deal to buy Credit Suisse will make UBS Switzerland’s only global bank and the Swiss economy more dependent on a single lender.

☆ Credit Suisse’s Message to Clients: ‘No Need to Take Action Right Now’
▼ + stars: | 2023-03-20 | by ( Weilun Soon | ) www.wsj.com time to read: 1 min

Credit Suisse Group AG has told its bankers to reassure clients that it is business as usual, even as those same employees worry about job security after rival UBS Group AG agreed to buy the troubled Swiss bank. Within 90 minutes of the two banks announcing a $3.24 billion deal on Sunday evening, Credit Suisse gave talking points designed to guide bankers and advisers on how to respond to clients’ queries about the potential merger.

European bank shares slumped, with an index of leading lenders (.SX7P) down 5.8%. Credit Suisse shares slumped 62%, reflecting the huge loss its shareholders will see in their investment in the bank. Monetary authorities in Singapore and Hong Kong, where Credit Suisse hosts large regional offices, separately said the Swiss bank's business continued without interruption. And Credit Suisse urged its staff to go to work, according to a memo to staff seen by Reuters. Credit Suisse staff arriving to work in Hong Kong and Singapore on Monday morning, however, fretted about retrenchments and retaining business.

Credit Suisse Group AG’s emergency merger with UBS Group AG will wipe out the bank’s riskiest bonds, rattling investors in the quarter-trillion-dollar market for similar bank debt. About 16 billion Swiss francs, or about $17.3 billion, of the bank’s additional tier 1 bonds will be completely written down, Switzerland’s financial regulator, Finma, said in a Sunday statement. Credit Suisse also said it was informed by Finma that the bonds would be “written off to zero.”

The European Central Bank vowed to support euro zone banks with loans if needed, adding the Swiss rescue of Credit Suisse was "instrumental" in restoring calm. There are also concerns about what happens next at Credit Suisse and what that means for investors and employees. The Swiss central bank said Sunday's deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse. Credit Suisse shares had lost a quarter of their value last week. The bank was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined confidence.

Many of the regional banks have also said that their deposit base has stabilized. "The regional banks have come under pressure because they are less equipped to handle a withdrawal of deposits the way the big banks are," said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York. In a move of solidarity, most of the major banks agreed on Thursday to deposit $30 billion in First Republic. At least four U.S. lawmakers said on Sunday they would consider whether a higher federal insurance limit on bank deposits than the current $250,000 threshold was needed to inspire more confidence in the system. Buffett has yet to prop up any of the regional banks.

[1/2] Logos of Swiss banks UBS and Credit Suisse are seen in Zurich, Switzerland March 19, 2023. UBS will buy rival Swiss bank Credit Suisse for 3 billion Swiss francs ($3.23 billion) and agreed to assume up to $5.4 billion in losses as it winds down the smaller peer's investment bank after a shotgun merger engineered by Swiss authorities. The U.S., UK and Swiss central banks are all scheduled to meet in the week ahead. Even after Sunday's news on Credit Suisse, optimism from analysts was laced with caution and some scepticism. Others drew attention to the losses likely to be suffered by Credit Suisse junior bondholders.

☆ Credit Suisse, the Risk-Taking Swiss Banking Giant, Succumbs to Crisis
▼ + stars: | 2023-03-20 | by ( Joe Wallace | Eliot Brown | ) www.wsj.com time to read: 1 min

Credit Suisse Group AG, the Swiss banking giant that liked to live dangerously, has run out of road. The bank struck a deal this weekend to be bought by rival UBS Group AG after an uncontrolled slide in its stock and bonds. The agreement marks the end of 167 years as an independent institution, a humbling comedown for a bank that once went toe-to-toe with U.S. giants on Wall Street and boasted a market value greater than that of Goldman Sachs Group Inc.

☆ Ex-Goldman CEO Blankfein says bank rout may depress growth, even with robust capital
▼ + stars: | 2023-03-20 | by ( Lananh Nguyen | ) www.reuters.com time to read: +1 min

[1/2] Lloyd Blankfein, former CEO of Goldman Sachs, speaks at the Boston College Chief Executives Club luncheon in Boston, MA, U.S., March 22, 2018. REUTERS/Brian Snyder/File PhotoNEW YORK, March 19 (Reuters) - Turmoil in the banking sector will probably weigh on economic growth as lenders become more conservative, former Goldman Sachs Group Inc (GS.N) CEO Lloyd Blankfein said Sunday. "The greater risk environment for financials leads to husbanding of capital and risk-taking, less and more conservative investing and lending, and inevitably, lower growth," Blankfein, who also served as Goldman's chairman, told Reuters. "While some banks have been hung up by poorly managed, concentrated risk, the overall banking system is extremely well capitalized and substantially more tightly regulated than in prior challenging times,” he said. Reporting by Lananh NguyenOur Standards: The Thomson Reuters Trust Principles.

☆ 'Shotgun wedding': What the UBS rescue of Credit Suisse means for global markets
▼ + stars: | 2023-03-20 | by ( Elliot Smith | ) www.cnbc.com time to read: +6 min

Axel Lehmann, chairman of Credit Suisse Group AG, left, and Colm Kelleher, chairman of UBS Group AG, during a news conference in Bern, Switzerland, on Sunday, March 19, 2023. "The accelerating loss of confidence and the escalation over the last few days have made it clear that Credit Suisse can no longer exist in its current form," Lehmann said. In equal parts "shotgun wedding" and arranged marriage, UBS agreed to buy stricken domestic rival Credit Suisse for 3 billion Swiss francs ($3.25 billion) on Sunday. The government will offer a loss guarantee of up to 9 billion Swiss francs, with UBS assuming the first 5 billion of potential losses. Shares of both UBS and Credit Suisse plunged on Monday morning, however.

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