Swiss supervisor defends AT1 write-offs at Credit Suisse
Switzerland’s financial markets supervisor is defending its decision to force a 16 billion Swiss franc (16 billion euro) write-off in Credit Suisse debt securities that were designed to function as a shock absorber in case of a major financial event.
Following Sunday’s announcement about the “shotgun wedding” between Credit Suisse and UBS, financial markets raised questions and possible legal challenges about the status of this particular type of debt, known as AT1 and as CoCos, or contingent convertibles.
UBS, Credit Suisse merge into Europe’s largest G-SIB
UBS is acquiring industry peer Credit Suisse for 3 billion Swiss francs. They will pay 0.76 Swiss francs in UBS shares. The opening offer was initially 0.25 Swiss francs per share. As recently as Friday, Credit Suisse closed at a closing price of 1.86 Swiss francs, representing a market capitalisation of 7.3 billion Swiss francs. The combined entity will become Europe’s largest Globally Systemically Important Bank, also known as a G-SIB.
Credit Suisse wants to become ‘smaller, more focused bank’
Negative global market sentiment against Swiss bank Credit Suisse meant Europe’s banking sector was under fire again on Wednesday, leading up to a evening statement by Swiss supervisors saying that they will commit liquidity to the bank. The bank then said it plans to move swiftly to create “a smaller and more focused bank”.
“If necessary, the SNB will provide CS with liquidity,” the Swiss National Bank and regulator Finma said last night.
‘Polycrisis world calls for a 20/40/20/20 portfolio’
The oh-so-popular post-war 60/40 portfolio is worn out - passé. So say many asset allocation strategists. The alternative is 60/40/20: equities, bonds and alternatives. Nay, says Zoltan Pozsar, strategist at Credit Suisse. The future is the 20/40/20/20 portfolio, consisting of cash, equities, bonds and commodities. He explains why in his formidable analysis War and Peace.
Chart of the Week: Is Credit Suisse a systemic risk?
European financials are in the spotlight again. And once again, it is not because of anything good. The CDS spread on Credit Suisse has spurted up over the past few days. Is this just the tip of the iceberg? Many “investors” and “gurus” are eager to point out possible systemic risk. At least as far as I can see, there is none of that right now.