Skip to main content

Change of approach for bond holders.

Bond index

 Domi­n­ique Laboureix, chair of the Single Res­ol­u­tion Board, the body in charge of shut­ting down failed banks, said fears that addi­tional tier 1 bank debt was «not investable any­more» should not apply in the EU. The decision over­turned estab­lished assump­tions that debt hold­ers would be pri­or­it­ised over equity hold­ers. As a result, the bank’s share­hold­ers received SFr3bn from UBS, while bond­hold­ers lost $17bn. The bond mar­ket jit­ters led the SRB, the European Bank­ing Author­ity and the European Cent­ral Bank to put out a state­ment stress­ing that com­mon equity instru­ments would con­tinue to be the first ones to absorb losses, with AT1 writ­ten down only after­wards.

«This type of approach would not be feas­ible under the European frame­work,» Enria told the EU Par­lia­ment yes­ter­day, adding they would wipe out bank equity before bonds, regard­less of whether a bank had to be wound down or was taken over by another lender. AT1s were intro­duced in the wake of the fin­an­cial crisis as part of reforms aimed at redu­cing the risk of tax­pay­ers being called upon to sup­port fail­ing banks. The secur­it­ies have grown into a mar­ket worth about $260bn. Con­cerns among investors fol­low­ing the week­end’s events were «under­stand­able» said Laboureix, adding that he was not cri­ti­cising the Swiss author­it­ies, which were act­ing on spe­cific national fin­an­cial sta­bil­ity con­cerns.

The SRB has respons­ib­il­ity for ensur­ing a fail­ure of one fin­an­cial insti­tu­tion does not spread tur­moil in bank­ing.

www.sba.tax

Labels:

Comments

  1. Bryce22 March 2023 at 11:41

    The Swiss authorities are responsible for the Credit Suisse problems. They could have and should have taken a closer look at what this bank does, how it invests money and assured that it wouldn't get to where it is now. We can't just shift blame to others when it's clearly the responsibility of authorities that major banks don't do stupid things like invest $5 billion in Archegos.

    ReplyDelete
    Replies
    1. Damian22 March 2023 at 18:55

      I wonder if the chairman of the bank got something for himself for investing that much money in something like Archegos. For savvy investors, Archegos was clearly a no-go but it seems CS had other ideas.

      Delete

Post a Comment

Cloud Bookkeeping

US FED rate rise.

  The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...
Post a Comment
Read more

India- UK trade deal.

  According to India's top trade official, talks with the UK regarding a trade agreement are progressing well, despite obstacles related to temporary work visas and the opening up industries like automotive and spirits. The Commerce and Industry Minister, Piyush Goyal, explained that India is seeking transition periods or greater market access in specific sectors due to its economy, which is slightly larger than the UK's and expected to outgrow it in the coming decades. If a trade deal is reached, it would be one of the most significant agreements for Britain since leaving the EU, and it would also be necessary for India, which surpassed the UK as the fifth-largest economy last year. Goyal stated that India aims to increase its economy from $3.5tn to $35tn by 2047, the country's centenary of independence. According to officials and diplomats in India, talks about a proposed trade deal may be finished by early September, just in time for the G20 summit in New Delhi. Nigel Hu...
Post a Comment
Read more

EU business slide.

  S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...
1 comment
Read more