Credit Suisse continues operating in Singapore

Following the announced takeover by UBS Group AG, the Monetary Authority of Singapore (MAS) confirmed today that Credit Suisse Group AG (CS) will continue to operate in Singapore without delays or limitations (UBS).

Clients of CS will retain full access to their accounts, and all contracts between CS and its counterparties will remain in effect. The acquisition is not anticipated to affect the stability of Singapore’s banking sector.

MAS has been in constant contact with the Swiss Financial Market Supervisory Authority (FINMA) and was briefed on the details of the acquisition by FINMA earlier today.

On 19 March 2023, FINMA published a statement announcing the acquisition and the supportive actions taken by the Swiss Confederation and the Swiss National Bank (SNB) [2]. This includes further liquidity support offered by SNB to guarantee that CS and UBS can continue to satisfy their obligations during the duration of the transaction.

These actions are intended to ensure the stability of CS’s clients, the Swiss financial center, and the worldwide financial markets.

The principal businesses of CS and UBS in Singapore are private banking and investment banking. The two banks are not retail-oriented. In Singapore, CS also provides financial services under the auspices of other regulated businesses.

These CS entities will continue to operate under their separate licenses for the time being. While the takeover is conducted, MAS will maintain regular touch with FINMA, CS, and UBS to enable a smooth transition, including addressing any potential employment impacts.

The Monetary Authority of Singapore (MAS) will continue to closely monitor the domestic financial system and international developments, and is prepared to provide liquidity through its suite of facilities to ensure that Singapore’s financial system remains stable and financial markets continue to operate in an orderly fashion.

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What happens to Credit Suisse’s $23 billion debt?

A takeover by UBS Group wiped out around 16 billion Swiss francs (S$23 billion) in Credit Suisse Group risky notes, resulting in an unprecedented loss for bondholders.

The transaction will result in a “full write-down” of the additional tier 1 (AT1) bonds of the bank. Finma, the Swiss financial regulator, stated that the judgment will increase the bank’s capital. The action also indicated the government’s willingness for private investors to bear the burden of Credit Suisse’s difficulties.

Under the UBS arrangement, the bank’s shareholders, who rank below bonds in the priority ladder for repayment in a bankruptcy, will get three billion Swiss francs.

According to data provided by Bloomberg, Credit Suisse’s parent firm had 13 AT1 bonds, also known as contingent convertible bonds, issued in Swiss francs, United States dollars, and Singapore dollars.

The bond write-off is the largest loss ever for Europe’s US$275 billion (S$368.4 billion) AT1 market, dwarfing the only other write-down of this type of security: a €1.35 billion (S$1.9 billion) loss suffered by junior bond holders of Spanish lender Banco Popular in 2017, when it was acquired by Banco Santander for €1 to avoid bankruptcy. Moreover, the equity was wiped off in this situation.

In a normal write-down situation, shareholders incur losses before AT1 bonds, as Credit Suisse demonstrated in a presentation to investors earlier this week. Credit Suisse’s AT1 bondholders reacted angrily to the move to reduce the bank’s riskiest debt rather than its shareholders.