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Regulators in Asia issued a statement guaranteeing that the banking system remains strong and stable after Swiss banking giant UBS agreed to buy rival Credit Suisse for $3.25 billion.
Swiss regulators play a key role in managing forced takeovers, to prevent a larger banking crisis that would threaten the global system. The deal was announced before markets opened Monday. Last week, Credit Suisse recorded its worst weekly decline since the start of the coronavirus pandemic.
The development came shortly after the collapse of Silicon Valley Bank, which led to the US regulator SVB backstopping uninsured deposits and offering new financing to troubled banks. Headlines about the global banking turmoil have fueled volatility and investor fears of a wider crisis.
Hong Kong says the industry is resilient
The Hong Kong Monetary Authority said the city’s banking sector was resilient with a strong capital and liquidity position. Credit Suisse’s operations in the city include a branch overseen by the HKMA and two licensed companies overseen by the Securities and Futures Commission.
“Everything will be open for business today as usual. Customers can continue to access their deposits with branches and trading services provided by Credit Suisse for the Hong Kong stock and derivatives market,” the HKMA said.
“The total assets of Credit Suisse, Hong Kong Branch are about HK$100 billion, less than 0.5% of the total assets of the Hong Kong banking sector. The exposure of the local banking sector to Credit Suisse is insignificant,” he added. .
At the end of February 2023, Credit Suisse was the ninth largest issuer of structured products in Hong Kong, accounting for about 4% of the total market in terms of market value of outstanding units, the HKMA said.
Singapore says the system is stable
In a similar move, the Monetary Authority of Singapore said Credit Suisse’s operations would continue in the city-state with “no disruption or restrictions.”
Credit Suisse customers will continue to have full access to their accounts and “contracts with partners remain in place. The takeover will have no impact on the stability of Singapore’s banking system,” MAS said.
MAS added that UBS and Credit Suisse do not serve retail customers, as their main activities in Singapore are in private banking and investment banking.
The central bank said it would stay in touch with Swiss regulators, UBS and Credit Suisse as “the takeover takes place, to facilitate an orderly transition, including addressing any impact on employment.”
Japanese banks ‘protected’
As for Japan, the country’s banking system will not be affected by the deal, said Cyrus Daruwala, managing director of IDC Financial Services.
“I think exposure to large wealth managers or asset managers like Credit Suisse or UBS, in general terms, would be about 4% of the portfolio,” Daruwala, told CNBC’s “Squawk Box Asia” Monday.
It was not a “significant amount” he added. “Japan, I think is relatively shielded, especially from Credit Suisse.”
Australia’s finances ‘strong’
Christopher Kent, assistant governor of the Reserve Bank of Australia, also stressed the strength of domestic banks despite the global panic triggered by the banking failure in the US
“The situation in the global bond market has been tense recently after the failure of Silicon Valley Bank in the United States,” he said in a speech on Monday.
“Volatility in the Australian financial markets has increased but the market is still functioning and, most importantly, Australian banks are very strong.”
Banks are well ahead in bond issuance plans for the year and could delay it “for a while,” Kent said. “Although markets remain tense … Australian banks’ issuance will continue to benefit from their balance sheet strength.”
Overall, IDC’s Daruwala said banks in the region are “very, very weak” for Credit Suisse. “I don’t think it will cause a ripple effect in Asia at least.”