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Regulators in Asia issued reassuring statements Monday that their banking systems remained robust and stable after Swiss banking giant UBS agreed to purchase its rival Credit Suisse for $3.25 billion.
Swiss regulators played a key role in orchestrating the forced takeover, to stem a bigger banking crisis that may threaten the worldwide system. The deal was announced before markets opened Monday. Last week, Credit Suisse logged their worst weekly decline for the reason that onset of the coronavirus pandemic.
The developments come shortly after the collapse of Silicon Valley Bank, which led to U.S. regulators backstopping SVB’s uninsured deposits and offering recent funding for troubled banks. The slew of headlines around the worldwide banking turmoil have heightened volatility and investor fears of a broader crisis.
Hong Kong says industry is resilient
The Hong Kong Monetary Authority said the town’s banking sector is resilient with strong capital and liquidity positions. Credit Suisse’s operations in the town comprise a branch supervised by the HKMA and two licensed corporations supervised by the Securities and Futures Commission.
“All of them will open for business today as usual. Customers can proceed to access their deposits with the branch and trading services provided by Credit Suisse for Hong Kong’s stock and derivatives markets,” HKMA said.
“The entire assets of Credit Suisse, Hong Kong Branch amounted to about HK$100 billion, representing lower than 0.5% of the whole assets of the Hong Kong banking sector. The exposures of the local banking sector to Credit Suisse are insignificant,” it added.
As of the top of February 2023, Credit Suisse was the ninth-largest listed structured product issuer in Hong Kong, accounting for about 4% of the whole market by way of market value of outstanding units, HKMA said.
Singapore says system is stable
In an identical move, the Monetary Authority of Singapore said Credit Suisse operations will proceed within the city-state with “no interruptions or restrictions.”
Credit Suisse customers will proceed to have full access to their accounts and “contracts with counterparties remain in force. The takeover isn’t expected to have an effect on the steadiness of Singapore’s banking system,” MAS said.
MAS added that UBS and Credit Suisse don’t serve retail customers, as their primary activities in Singapore are in private banking and investment banking.
The central bank said it is going to remain in close contact with Swiss regulators, UBS and Credit Suisse as “the takeover is executed, to facilitate an orderly transition, including addressing any impact on employment.”
Japan banks ‘shielded’
As for Japan, the country’s banking system is unlikely to be affected by the deal, said Cyrus Daruwala, managing director of IDC Financial Services.
“I feel the exposure to a big wealth manager or an asset manager like Credit Suisse or UBS, typically speaking terms, could be roughly 4% of their portfolio,” Daruwala, told CNBC’s “Squawk Box Asia” on Monday.
That isn’t “a big amount” he added. “Japan, I maintain has been relatively shielded, especially from Credit Suisse.”
Australia financials ‘strong’
Christopher Kent, assistant governor of the Reserve Bank of Australia, also emphasized domestic banks are robust despite the worldwide panic triggered by banking failures within the U.S.
“Conditions in global bond markets have been strained recently following the failure of Silicon Valley Bank in the USA,” he said in a speech on Monday.
“Volatility in Australian financial markets has picked up but markets are still functioning and, most significantly, Australian banks are unquestionably strong.”
Banks are already well advanced on their bond issuance plans for the 12 months and will defer “for some time,” Kent said. “Even when markets remain strained . . . Australian banks’ issuance will proceed to learn from the strength of their balance sheets.”
Overall, IDC’s Daruwala said banks within the region have “very, little or no” exposure to Credit Suisse. “I do not think it’ll cause a ripple effect in Asia a minimum of.”
