UBS Group AG, having subsumed Swiss Bank Corp 25 years ago, is U Group AG, creating a single Swiss banking giant. Credit Suisse's shareholders get something and senior bondholders are protected but that luxury does not extend down the capital stack. How banks are able to finance themselves is poised to become a lot more challenging.
To facilitate the deal and square up the numbers, the Swiss regulator Finma has ordered that about 16 billion Swiss francs ($17.3 billion) of Credit Suisse's riskiest type of debt will now be worthless. Known as Additional Tier 1 (ATI) bonds, and also called contingent convertibles or CoCos, this debt can be converted into equity or written off if a bank's capital falls below a prescribed level. Owners of the Swiss firm's securities will get nothing. It was a lovely asset class while it lasted.
Weaker European banks will struggle even harder to find investors to commit capital that, not just in theory but in practice, really can be wiped out. The entire banking sector will end up paying for Credit Suisse's myriad transgressions one way or another. The repercussions of the Swiss takeover structure may close off access to CoCos for all but the strongest banks the definition of which will come under ever-closer scrutiny.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Quick Edit: The market's green role
The world needs to bend its rising curve of carbon emissions, a goal that's proving elusive. Adding to the challenge, US climate policy is likely to flip back into neglect mode next year.
Growth shouldn't suffer for want of a market fix
Packaged food companies should drive a food-processing revolution and run a campaign for substitution of fresh-veggie demand. It'll crush price volatility and open up space for rate cuts
We should reform import tariffs to boost Make in India!
Tariff reforms to resolve duty inversions can arrest the 'cost competitiveness leak' of Indian manufacturing
Trying to quantify everything may worsen human decisions
'Quantification fixation' is real—and we should learn to resist it
Hope has sprung anew amid the thick haze hovering over COP-29
The climate summit has seen rules being ratified for a carbon market, progress on finance and high corporate participation
Trump's return is set to send the world scouting for fresh options
His confrontational stand on issues will ruffle feathers and make nations review their alignments
Why national pride has not helped clean up Delhi's air
A sense of shame was expected to get it done. That hasn't worked. Do we lack the will and talent?
SEBI CAN DO MORE TO DISSUADE RETAIL F&O SPECULATION
A recent Securities and Exchange Board of India (Sebi) report highlighted the significant losses individual traders have incurred in the equity futures and options (F&O) segment between FY22 and FY24.
Is filing ITR in old regime still valid?
I am with the Indian Army. Until last year, we received Form 16 under the old tax regime, including allowances such as HRA, travel and uniform.
Avoid common mistakes in NRO, NRE accounts: A guide for NRIs
Tips on using NRE and NRO accounts to effectively manage funds, repatriate money and remain tax-compliant
