Bond investors woke up with a big problem on Monday. Sunday’s emergency takeover of struggling Swiss bank Credit Suisse by its rival UBS deepened a rout in AT1 bonds. These instruments are designed to be wiped out when an issuing bank hits financial trouble, reducing its debts. Swiss regulators obliterated about $17bn of Credit Suisse
News
“They’ve changed the law and they have basically stolen $16bn of bonds,” Davide Serra, founder and CEO of Algebris Investments, told investors on a call this morning. “This has been a big policy mistake, [and] they will regret it. [ . . . ] Switzerland will be the new pariah in this [loss-absorbing bond market]. They asked for it,
The Bank of Delight, which operates three branches in a sparsely populated patch of western Arkansas, does not qualify as a systemically important financial institution, but it holds a place of special importance for people who live nearby. Funded overwhelmingly by local deposits, Delight is a crucial lender to loggers and livestock farmers in a
Credit Suisse bondholders were in uproar on Monday and the European Central Bank raised concerns after the rescue deal by rival UBS wiped out $17bn of the failed Swiss bank’s bonds, upending debt recovery norms and undermining financial market confidence. “In my eyes, this is against the law,” said Patrik Kauffman, a fund manager at
Good morning. Credit Suisse is well on its way to becoming a UBS subsidiary, and this is good news for markets. Our colleagues at Due Diligence have the blow-by-blow. Less good is the fact that, to clinch a deal, regulators ordered Credit Suisse to zero out some junior bondholders, even as shareholders get about 80
Banking is a massive, complicated and delicate confidence trick. Normally it works fine. But as soon as people worry that it could fall apart, it often does, sometimes spectacularly. So when an old friend, an entrepreneur in Geneva, messaged me last week to say he had moved his money out of Credit Suisse, having already
The writer is president of Queens’ College, Cambridge, and an adviser to Allianz and Gramercy Many commentators have rushed to embrace the view that Federal Reserve policy is now in a new world following the sudden failure of three US banks and the deployment of “bazooka measures” to safeguard the financial system. But in reality,
Asian bank debt and shares fell on Monday after the wipeout of $17bn of Credit Suisse bonds in a takeover by UBS, sparking concern about similar debt and heralding further turmoil in European markets. HSBC shares fell 6 per cent in Hong Kong, while Standard Chartered fell 5 per cent and Bank of East Asia
Little more than a week ago, investors thought it was a done deal that the Bank of England would press ahead with yet another increase in interest rates when its Monetary Policy Committee meets this week. By the end of last week, pricing in financial markets suggested that the chances of a policy move on
Flagstar Bank owner New York Community Bank has agreed to buy most of the operations of Signature Bank, the failed New York City-based lender. The Federal Deposit Insurance Corporation announced the deal on Sunday, one week after the US banking regulator and deposit insurer took control of Signature. The seizure came on the heels of
A unit of New York Community Bancorp has agreed to buy “substantially all” deposits and some loan portfolios of the collapsed Signature Bank, the US federal deposit agency announced on Sunday. From Monday, Flagstar Bank will acquire 40 former Signature branches, which will be rebranded under its name, the Federal Deposit Insurance Corporation said. The
Holders of $17bn of Credit Suisse bonds will have their investment wiped out following the bank’s takeover by UBS, in a surprise move that is expected to cause ructions in European debt markets when they open on Monday. As part of the historic deal between the banks, Swiss financial regulator Finma ordered that SFr16bn of
UBS agreed to buy Credit Suisse for $3.25bn after a frantic weekend of negotiations brokered by Swiss regulators to safeguard its banking system and attempt to prevent a crisis spreading across global financial markets. The historic deal follows five days in which the Swiss establishment raced to end a deepening crisis at Credit Suisse that
The Federal Reserve and other global central banks have announced fresh measures to improve US dollar liquidity as global financial markets reel from the turmoil hitting the banking sector. In a joint statement released on Sunday, the world’s leading central banks said that they will launch daily operations to make funding available via standing swap
Plans to revamp UK bank capital rules risk a 25 per cent cut in lending to small businesses, threatening jobs and economic growth, a new study has warned. The Bank of England’s Prudential Regulation Authority announced the controversial plans to overhaul the capital treatment for small business lending in December, as part of broader proposals
The writer is managing partner and head of research at Axiom Alternative Investments Bank investors are well aware of the risks; they know that banking relies on trust and that sentiment can change quickly. The crisis now faced by Credit Suisse is, however, a previously unseen phenomenon. Every single bank failure I can remember was
Days after Vladimir Putin was hit with an international warrant for alleged war crimes in Ukraine, Xi Jinping’s first state visit to Moscow in four years is a demonstration of the Chinese leader’s commitment to Russia’s president — but is also set to show the red lines in what the pair last year dubbed a
The Biden administration is under mounting pressure to call for an expansion of the federal guarantee on bank deposits to shore up confidence in the financial system and prevent further distress among US regional banks. The Federal Deposit Insurance Corporation, which is funded by banks, guarantees deposits up to $250,000. But a growing chorus of
Smaller US banks have big problems. For now, their focus is on survival. That is why the Mid-Size Bank Coalition of America has pleaded for an extension of deposit insurance to staunch the outflows. But even after stability is restored, the lending capacity of regional banks will be severely constrained. That will damage the US
Credit Suisse may shortly be a historic footnote. Its capital buffers meant nothing to many depositors. They went on pulling funds even after the Swiss National Bank put up SFr50bn in extra liquidity. UBS is taking the time bomb for the Swiss team. Pray the countdown will stop, stalling this bank run and any others
The writer is an FT contributing editor The famous quantum mechanics thought experiment posits that if a cat is sealed in a box with a deadly substance, you can’t know whether it is still alive until you open said box. In the meantime, it is simultaneously alive and dead. And so it is with banking