Credit Suisse – bankrupt
Credit Suisse – everyone, bankrupt via forced merger with UBS. Although in official statements they carefully tried to avoid the expression “bankruptcy”, but you need to call the events as they are. For a number of reasons and circumstances, the further continuation of the activities of Credit Suisse became impossible.
The 166-year history of the bank ended almost instantly. The largest bank liquidation in Swiss history, the largest bankruptcy by assets since Lehman Brothers, and the largest bank collapse in Europe.
Significant distortion of the example of “safe haven” in Switzerland, painstakingly built for over 100 years. Even the “indestructible financial fortress” is cracking, what can we say about other financial structures?
The bank, which has the highest liquidity coverage ratio (about 50%), went under in just a week after a massive reputational blow, a flight of customers/investors and the closing of limits on the bank by leading financial counterparties.
UBS agreed to buy Credit Suisse in a deal brokered by the government. The deal is worth 3 billion francs (less than half the value of Credit Suisse at Friday’s close and more than 40 times cheaper than at its peak in 2007) in a deal with the government that includes extensive government guarantees of the government and the SNB.
The Swiss National Bank is providing up to 100 billion francs in liquidity support to UBS, while the government is providing a 9 billion franc guarantee against possible losses from Credit Suisse’s assets as part of a merger, adjustment and business restructuring.
In fact, UBS is buying out for 3bn a bank with over 530bn francs in assets and over 120bn cash position, backed by a 100bn cash gap guarantee from the SNB and a 9bn loss from the government – a phenomenal deal for UBS.
The merger of the transaction was carried out without the approval of the shareholders with all conceivable and unimaginable violations of formal protocols in an extremely short period of time.
This is the fastest takeover of a bank of this level in the history of the banking industry (from the moment of acute problems), both in Europe and in the USA.
The Swiss government has passed an emergency regulation to avoid the need for shareholder approval, destroying the principle of transparency and legal certainty, i.e. conditions when there is a deviation from the rules depending on the conjuncture.
Shareholders receive 3 billion, but bond investors are reset to 16 billion francs. The deal will result in a “full write-off” of the bank’s additional Tier 1 bonds, Swiss financial regulator FINMA said in a statement.
The write-down of the bonds was the largest loss for the European AT1 market, amounting to $275 billion, far exceeding the only €1.4 billion write-down of this type of securities to date in 2017 at the time of the bankruptcy of Banco Popular and the takeover by Banco Santander.
This is a special type of bonds for banks, integrated in 2009 to increase the capital of banks, acting as a buffer to increase capital adequacy.
The forced takeover of Credit Suisse is rather strange and dubious at first glance. At the moment, there are no details on the merger of UBS and Credit Suisse, and the process of coordinating organizational and legal issues will last at least until the end of 2023, but apparently, the absorption of the entire division is taking place along with the profitable segment of traditional banking.
Recently, a previously unseen innovation has appeared – ultra-fast bankruptcy and takeover of banks, which rather further disorients and destabilizes the market, because. it is not clear what other victim will fall under this amazing invention?