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Regulators in Asia issued reassuring statements on Monday that their banking systems remained strong and stable after Swiss banking giant UBS agreed to buy rival Credit Suisse with for $3.25 billion.
Swiss regulators played a key role in arranging the forced takeover, in order to avert a larger banking crisis that could threaten the global system. The deal was announced before the market opened on Monday. Last week, Credit Suisse logged in worst weekly drop since the start of the coronavirus pandemic.
The development took place shortly after the collapse of Silicon Valley Bank, leading to US regulator to support SVB’s uninsured deposits and provide new capital for troubled banks. The flood of headlines surrounding the global banking turmoil has increased volatility and fueled investors’ fears of a broader crisis.
Hong Kong says industry is resilient
The Hong Kong Monetary Authority said the city Banking sector is resilient with strong capital position and liquidity. Credit Suisse’s operations in the city include a branch overseen by the HKMA and two licensed firms overseen by the Securities and Futures Commission.
“All of them will open for business as usual today. Customers can continue to access their deposits with the branch and trading services offered by Credit Suisse for the stock and derivatives markets. of Hong Kong,” the HKMA said.
“The total assets of Credit Suisse, Hong Kong Branch amount to approximately HK$100 billion, accounting for less than 0.5% of the total assets of the Hong Kong banking industry. with Credit Suisse is negligible,” it added.
The HKMA said that as of the end of February 2023, Credit Suisse was the ninth largest listed structured product issuer in Hong Kong, accounting for approximately 4% of the total market in terms of market value of outstanding units. onion.
Singapore says system is stable
In a similar move, the Monetary Authority of Singapore said Credit Suisse’s operations would continue in the city-state “without interruption or restriction”.
Credit Suisse customers will continue to have full access to their accounts, and “contracts with partners remain in effect. The takeover is not expected to affect system stability. banking system of Singapore.” MAS says.
MAS added that UBS and Credit Suisse do not serve retail clients, as their primary operations in Singapore are private banking and investment banking.
The central bank said it would stay in close contact with Swiss regulators, UBS and Credit Suisse as “takeovers are made, to facilitate an orderly transition, including settlement of any impact on employment.”
Japanese banks are ‘shielded’
As for Japan, the country’s banking system is unlikely to be affected by the deal, said Cyrus Daruwala, chief executive officer of IDC Financial Services.
Daruwala told CNBC’s “Squawk Box Asia” on Monday: “I think exposure to a large wealth management firm or an asset management firm like Credit Suisse or UBS, in general, would be about 4% of their portfolios.”
It’s not “a substantial amount of money,” he added. “Japan, I think has been relatively well protected, especially from Credit Suisse.”
Australia’s financials ‘strong’
Christopher Kent, assistant governor of the Reserve Bank of Australia, also stressed that domestic banks remained strong despite the global panic caused by the banking crash in the US.
“Conditions in the global bond market have recently become tense following the failure of the Silicon Valley Bank in the United States,” he said. in a speech in Monday.
“Volatility in Australian financial markets has increased but markets remain active and most importantly Australian banks are strong.”
Kent said banks had planned to issue bonds during the year and could delay “for a while”. “Even as markets remain tense… Australian banks’ issuance will continue to benefit from the strength of their balance sheets.”
Overall, IDC’s Daruwala said banks in the region have “very, very little” exposure to Credit Suisse. “I don’t think it will at least have a spillover effect in Asia.”
