There are conflicting reports. A NZZ opinion piece[1] claims that a take over would be unlikely as UBS has dissolved most of their investment banking and taking over CS would pull them back in. Then again the new CS leadership has been refocusing the bank away from investment banking as well but that has only been a short period of time.
According to SRF there are talks between UBS, CS and the SNB. [2]
I wonder if UBS is being pushed into it behind the scenes. There are many less savory possible buyers, so I could see UBS being incentivized into action.
Credit Suisse should definitely be bankrupt. Every major banking scandal over the last decade has happened there. Absolutely zero internal controls and zero risk management, it's absurd they've lasted this long.
Why are mergers the go-to solution for rescuing banks? Why do they think that, rather than "arrest[ing the] collapse in confidence in Credit Suisse," a merge won't just cause a similar collapse in confidence for UBS too?
Probably worth going through all the options for distressed banks:
-1. Sell distressed assets (Treasuies?) into the market to meet withdrawals. This is bad, in the sense that it converts an unrealized loss into a realized one, and if allowed to continue will shortchange a depositor.
0. Sell the company, and use the proceeds to pay off bond holders, and maybe shareholders if lucky. Merger is basically a fast track version of this.
1. Raising more equity. Dilutes existing shareholders but sometimes something is better than nothing. Usually pretty slow, but I bet you could get a direct listing done quick. Arguably announcing a new raise is what caused the SVB run.
2. Issuing corporate debt / bonds. You'd have to be a special kind of person to buy bonds from a failing bank: limited upside, tons of risk.
3. Attracting / retaining deposits. You can raise rates to
retain people, but its very much the same problem as bonds, just slightly less risk of being zeroed out. You can hook up to deposit brokers, but there are rules around them because one decision maker behind millions of deposits is destablizing. Seems like a solution you can only apply before the problem is severe.
4. Sell pieces of the bank / accounts. Retail deposits are valuable in the sense that they are a very cheap source of money for banks. But you kinda have to sell _all_ the accounts, or theres a buyer-seller information asymmetry that Akerlof wrote about. Even if you solve the lemon market dilemma, you are selling a cheap funding source, and need to borrow elsewhere to replace the funding source.
AFAICT, what happens is deposit insurers, bond holders and the potential acquirers sit in a locked room look at financial statements and try to make a guess at how much money the insurers need to pay to get some acquirer to agree to buy the whole bank, with as little disruption to depositors as possible.
My non expert understanding is that it allows the bank equity to be haircut assuming there is enough equity to cover the losses. If there isn’t enough equity, then the merger wouldn’t go through.
Not sure if anyone here appreciates leftist news, but someone called into the Majority Report recently predicting Credit Suisse would fold next. As a normal person I found his comments on regional bank stability interesting.
That channel doesn't meet any normal global definition of 'leftist', the global left generally not being onboard with investment capitalism as the driving engine of the economy. Also, the left isn't afraid to discuss petrodollar recycling - i.e. it was the Saudis who refused to keep pouring their petrodollars into Credit Suisse, and Saudi Arabia and Qatar are the top investors in Credit Suisse.
This Credit Suisse story might have some connection to the China-sponsored restoration of diplomatic and economic ties between Saudi Arabia and Iran a week ago, perhaps.
Credit Suisse has a century-long resume of working with evil people to hide money, from Nazis and genocidal dictators to drug lords. On the other side, their business is fairly weak: they aren't well-known for their trading or investment banking prowess, and the few people they have in that area aren't good. Most of the other banks have adapted to have both wealth management and a sales and trading arm. Credit Suisse only really has wealth management.
It turns out there's a really big synergy here: having an investment banking division helps get your wealth management clients unique deals that are usually very profitable. This means that the other banks can essentially out-compete CS, since their clients don't get the same kinds of deals. Combine that with the reputation and there's not much reason to do business with them.
(The actual weird thing is—and I don't mean to pick on you at all! it's a widespread phenomenon and genuinely weird—how common it is for a story to be prominent on HN and yet many readers still miss it.)
[+] [-] hd4|3 years ago|reply
[+] [-] sschueller|3 years ago|reply
According to SRF there are talks between UBS, CS and the SNB. [2]
[1] https://www.nzz.ch/meinung/warum-die-ubs-nicht-mit-der-cs-in...
[2] https://www.srf.ch/news/wirtschaft/cs-turbulenzen-medien-ubs...
[+] [-] ortusdux|3 years ago|reply
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] baq|3 years ago|reply
[+] [-] HPMOR|3 years ago|reply
[+] [-] buggythebug|3 years ago|reply
[+] [-] hestefisk|3 years ago|reply
[+] [-] yborg|3 years ago|reply
[+] [-] Uvix|3 years ago|reply
[+] [-] jldugger|3 years ago|reply
-1. Sell distressed assets (Treasuies?) into the market to meet withdrawals. This is bad, in the sense that it converts an unrealized loss into a realized one, and if allowed to continue will shortchange a depositor.
0. Sell the company, and use the proceeds to pay off bond holders, and maybe shareholders if lucky. Merger is basically a fast track version of this.
1. Raising more equity. Dilutes existing shareholders but sometimes something is better than nothing. Usually pretty slow, but I bet you could get a direct listing done quick. Arguably announcing a new raise is what caused the SVB run.
2. Issuing corporate debt / bonds. You'd have to be a special kind of person to buy bonds from a failing bank: limited upside, tons of risk.
3. Attracting / retaining deposits. You can raise rates to retain people, but its very much the same problem as bonds, just slightly less risk of being zeroed out. You can hook up to deposit brokers, but there are rules around them because one decision maker behind millions of deposits is destablizing. Seems like a solution you can only apply before the problem is severe.
4. Sell pieces of the bank / accounts. Retail deposits are valuable in the sense that they are a very cheap source of money for banks. But you kinda have to sell _all_ the accounts, or theres a buyer-seller information asymmetry that Akerlof wrote about. Even if you solve the lemon market dilemma, you are selling a cheap funding source, and need to borrow elsewhere to replace the funding source.
AFAICT, what happens is deposit insurers, bond holders and the potential acquirers sit in a locked room look at financial statements and try to make a guess at how much money the insurers need to pay to get some acquirer to agree to buy the whole bank, with as little disruption to depositors as possible.
[+] [-] unyttigfjelltol|3 years ago|reply
[+] [-] simple-thoughts|3 years ago|reply
[+] [-] notatoad|3 years ago|reply
[+] [-] nielsbot|3 years ago|reply
"flashback: Caller Predicted Credit Suisse Would Be Next To Fall" https://www.youtube.com/watch?v=DDFKvzXdLcA
(Not a banker, so maybe lots of people expected this?)
[+] [-] photochemsyn|3 years ago|reply
https://www.cnbc.com/2023/01/24/qatar-doubles-credit-suisse-...
This Credit Suisse story might have some connection to the China-sponsored restoration of diplomatic and economic ties between Saudi Arabia and Iran a week ago, perhaps.
[+] [-] alecco|3 years ago|reply
[+] [-] johndhi|3 years ago|reply
[+] [-] pclmulqdq|3 years ago|reply
It turns out there's a really big synergy here: having an investment banking division helps get your wealth management clients unique deals that are usually very profitable. This means that the other banks can essentially out-compete CS, since their clients don't get the same kinds of deals. Combine that with the reputation and there's not much reason to do business with them.
[+] [-] hsjqllzlfkf|3 years ago|reply
[+] [-] unixhero|3 years ago|reply
[+] [-] duxup|3 years ago|reply
[+] [-] switch007|3 years ago|reply
[+] [-] dang|3 years ago|reply
(The actual weird thing is—and I don't mean to pick on you at all! it's a widespread phenomenon and genuinely weird—how common it is for a story to be prominent on HN and yet many readers still miss it.)
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[+] [-] buggythebug|3 years ago|reply