Firstpost
  • Home
  • Video Shows
    Vantage Firstpost America Firstpost Africa First Sports
  • World
    US News
  • Explainers
  • News
    India Opinion Cricket Tech Entertainment Sports Health Photostories
  • Asia Cup 2025
Apple Incorporated Modi ji Justin Trudeau Trending

Sections

  • Home
  • Live TV
  • Videos
  • Shows
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Health
  • Tech/Auto
  • Entertainment
  • Web Stories
  • Business
  • Impact Shorts

Shows

  • Vantage
  • Firstpost America
  • Firstpost Africa
  • First Sports
  • Fast and Factual
  • Between The Lines
  • Flashback
  • Live TV

Events

  • Raisina Dialogue
  • Independence Day
  • Champions Trophy
  • Delhi Elections 2025
  • Budget 2025
  • US Elections 2024
  • Firstpost Defence Summit
Trending:
  • PM Modi in Manipur
  • Charlie Kirk killer
  • Sushila Karki
  • IND vs PAK
  • India-US ties
  • New human organ
  • Downton Abbey: The Grand Finale Movie Review
fp-logo
Will the Credit Suisse bank takeover ease financial fears?
Whatsapp Facebook Twitter
Whatsapp Facebook Twitter
Apple Incorporated Modi ji Justin Trudeau Trending

Sections

  • Home
  • Live TV
  • Videos
  • Shows
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Health
  • Tech/Auto
  • Entertainment
  • Web Stories
  • Business
  • Impact Shorts

Shows

  • Vantage
  • Firstpost America
  • Firstpost Africa
  • First Sports
  • Fast and Factual
  • Between The Lines
  • Flashback
  • Live TV

Events

  • Raisina Dialogue
  • Independence Day
  • Champions Trophy
  • Delhi Elections 2025
  • Budget 2025
  • US Elections 2024
  • Firstpost Defence Summit
  • Home
  • Explainers
  • Will the Credit Suisse bank takeover ease financial fears?

Will the Credit Suisse bank takeover ease financial fears?

the associated press • March 21, 2023, 13:20:47 IST
Whatsapp Facebook Twitter

Credit Suisse isn’t just any bank. Unlike midsize Silicon Valley Bank, which went under earlier this month in the US, it is one of 30 banks classified as globally significant because it could pose a risk of bigger trouble if it collapses

Advertisement
Subscribe Join Us
Add as a preferred source on Google
Prefer
Firstpost
On
Google
Will the Credit Suisse bank takeover ease financial fears?

Frankfurt: In a bid to ease turmoil in the world financial system, Swiss authorities engineered a plan for the UBS bank to acquire its troubled smaller rival Credit Suisse at a marked-down price. It’s another urgent attempt to fight fears that have put the financial world on edge 15 years after the failure of US investment bank Lehman Brothers pitched the global economy into a crisis. Here are key things to know — and some things that aren’t yet known — about the takeover and the wider market anxiety fuelled by bank failures in the US. Why is UBS taking over Credit Suisse? Swiss authorities pushed UBS to take over its rival after the price of Credit Suisse shares plunged and depositors fled, raising fears that it could fail. Credit Suisse isn’t just any bank. Unlike midsize Silicon Valley Bank, which went under earlier this month in the US, it is one of 30 banks classified as globally significant because it could pose a risk of bigger trouble if it collapses, as happened with Lehman. **Also read: Credit Suisse crisis: Does India have reasons to worry?** Credit Suisse’s troubles pre-dated Silicon Valley’s failure, including a $5.5 billion (Rs 45 lakh crore) loss on its dealings with private investment firm Archegos and a spying scandal. Then fears about banks fed by the US failures made investors take a closer, less friendly look at banks. When Credit Suisse’s biggest investor, Saudi National Bank, refused to put up more money, investors and depositors headed for the exits. Will the takeover restore confidence in the global financial system? Confidence in banks is shaky right now. That said, economists, bank regulators and stock-market analysts generally say that banks are in better shape than in 2008, with thicker financial buffers against losses and a slew of new regulations. And this time, policymakers have been quicker to respond. The US Federal Reserve offered credit to banks that suffered uninsured losses on bond holdings due to rising interest rates. [caption id=“attachment_12324962” align=“alignnone” width=“640”] Axel Lehmann, Chairman Credit Suisse (left), and Colm Kelleher, Chairman UBS, shake hands beside Swiss Federal President Alain Berset and Swiss finance minister Karin Keller-Sutter, at the end of a press conference in Bern, Switzerland. AP[/caption] On Sunday, just ahead of the opening of markets in Asia, other central banks joined the Fed in expanding unlimited dollar credit to any bank that needs it. That was a swift preemptive move used in earlier emergencies such as the pandemic market meltdown of 2020. Swiss officials balked at letting Credit Suisse just fail, unlike the US government in 2008, when it let Lehman go under, spreading losses and fear across the financial system. Financial institutions had been in trouble since 2007, but it wasn’t until two weeks after Lehman that the US Congress came to the system’s aid with a $700 billion (Rs 57.87 lakh crore) emergency economic stabilisation act. **Also Read: Which will be the next bank to fail? The man who predicted the 2008 Lehman Brothers collapse has the answer** Questions have been raised about the technicalities of the Credit Suisse rescue and the decision to insure all depositors at Silicon Valley. But officials are showing that they learned one lesson from Lehman, “namely to act decisively and swiftly, and if needed to run roughshod over any discussion of moral hazard and legal obstacles, both of which can be discussed once the dust settles,” said Marc Ostwald, chief economist and global strategist at ADM Investor Services International. As a result, “some semblance of calm has been restored. This crisis is far from over, but at least some of the immediate risks of an exponential ballooning of contagion effects have been mitigated.” So, we can sound the all clear? Not yet. UBS shares initially plunged Monday on fears that the bank has simply inherited trouble by buying Credit Suisse. The share later turned positive. And the way the takeover was done, by wiping out some of the Credit Suisse’s bondholders, rattled markets in those bonds. So new problems could arise. “Containing crises is a bit like a game of whack-a-mole — with new fires starting as existing ones are extinguished,” said Neal Shearing, group chief economist at Capital Economics. “A key issue over the next week will be whether problems arise in other institutions or parts of the financial system.” **Also Read: Bitcoin at 9-month high following SVB, Signature Bank collapse, rose 26% just last week** Among the lingering worries: Did other US banks ignore the risk that interest rates might swiftly rise, as Silicon Valley did? Could there be trouble in other parts of the financial sector that don’t take insured deposits, such as investment banks, hedge funds and mortgage brokers? Said Shearing: “A reasonable base case is that we avoid a system-wide crisis on the scale of 2007-08, but further problems emerge at individual institutions.” What does this mean for Swiss Banks? In the global financial crisis, it was UBS that needed government help, while Credit Suisse did not. Now UBS faces the task of integrating Credit Suisse and sorting out its problems. [caption id=“attachment_12325002” align=“alignnone” width=“640”] Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking. AP[/caption] Switzerland, which had five big banks 30 years ago, is now left with one very large bank that’s “too big to fail.” “That means the government is even more challenged to support any problems in the financial system,” said Tobias Straumann, an economic history professor at the University of Zurich. What does this mean for the global economy? Analysts say pressure from markets and regulators may now make banks less likely to risk new lending, which could restrict credit for new purchases or investment in new businesses. If credit is seen to tighten because of fears over banks, central banks such as the Fed, the European Central Bank and the Bank of England might choose to slow down their recent rapid interest rate increases aimed at fighting inflation — or to stop the increases at a lower level than they otherwise would have. **Also Read: Silicon Valley Bank collapse: What we learnt from the bank's failure** Tighter credit, whether from nervous banks or from central bankers raising rates, tends to counteract inflation. That was behind European Central Bank head Christine Lagarde’s statement last week after the bank raised rates by a half-percentage point. She said further rate decisions would be taken meeting to meeting based on the latest data. Lagarde said Monday that the current financial tensions “might have an impact on demand and might actually do some of the work that might otherwise be done by monetary policy.” Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.

Tags
Credit Suisse Silicon Valley Bank US Federal Reserve Financial market UBS federal government Banking Crisis Global Financial Crisis FDIC Swiss government swiss regulators SVB Collapse Credit Suisse bank Silvergate Bank credit suisse shares credit suisse failure ubs credit suisse takeover ubs credit suisse acquisition global banking system us banking failure signature bank crisis financial fears bank takeover credit suisse takeover credit suisse bank takeover credit suisse financial crisis credit suisse rescue
End of Article
Latest News
Find us on YouTube
Subscribe
End of Article

Impact Shorts

Ghaziabad woman dead, pilgrims attacked in bus… How Nepal’s Gen-Z protests turned into a living hell for Indian tourists

Ghaziabad woman dead, pilgrims attacked in bus… How Nepal’s Gen-Z protests turned into a living hell for Indian tourists

Prime Minister KP Sharma Oli resigned following violent protests in Nepal. An Indian woman from Ghaziabad died trying to escape a hotel fire set by protesters. Indian tourists faced attacks and disruptions, with some stranded at the Nepal-China border during the unrest.

More Impact Shorts

Top Stories

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Top Shows

Vantage Firstpost America Firstpost Africa First Sports
Latest News About Firstpost
Most Searched Categories
  • Web Stories
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Tech/Auto
  • Entertainment
  • IPL 2025
NETWORK18 SITES
  • News18
  • Money Control
  • CNBC TV18
  • Forbes India
  • Advertise with us
  • Sitemap
Firstpost Logo

is on YouTube

Subscribe Now

Copyright @ 2024. Firstpost - All Rights Reserved

About Us Contact Us Privacy Policy Cookie Policy Terms Of Use
Home Video Shorts Live TV