Credit Suisse: discredit, banishment, rescue and takeover
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The collapse of Credit Suisse's shares on 17 March 2023, after comments made by its largest shareholder, triggered a panic on the markets and raised fears of European systemic risk. The bank had already faced a critical moment in autumn 2022 due to various factors, including concerns over its restructuring plan and repeated scandals. Credit Suisse's credibility, governance, and risk management had been brought into question, leading to doubts about its viability and potential resolution. FINMA and the Swiss National Bank reacted by providing liquidity to Credit Suisse, and observers began to talk of a rescue by UBS and/or a partial nationalisation of the sound businesses. On 19 March 2023, UBS announced it would buy all of Credit Suisse's businesses, with the Swiss regulator wiping out the value of all Credit Suisse's AT1 debt.
The UBS takeover of Credit Suisse has had a direct impact on international banks' cost of subordinated financing, and regulations could be toughened in the future. This situation raises doubts on regulation and undermines investor confidence in the AT1 bond segment. However, the recent volatility in financial markets triggered by UBS's takeover of Credit Suisse is not expected to have a significant impact on the European banking system, which remains profitable, with comfortable solvency and liquidity. The Single Resolution Mechanism reaffirms that the bail-in principle requires that shareholders take the first hit, followed by super-subordinated (AT1) creditors, then subordinated (Tier 2) creditors, and lastly, senior creditors.
Read the report to learn more about Credit Suisse's discredit, banishment, rescue, and takeover, and the potential impact on the banking system.
