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Regulators in Asia issued reassuring statements Monday that their banking systems remained sound 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 stop a bigger banking crisis that might have threatened the global system. The deal was announced ahead of the markets opening on Monday. Last week, Credit Suisse posted its worst weekly decline since the starting of the coronavirus pandemic.
The events happen shortly after the collapse of Silicon Valley Bank, which led to US regulators blocking SVB’s uninsured deposits and offering recent funding to distressed banks. The plethora of headlines about the global banking turmoil has added to volatility and investor fears of a wider crisis.
Hong Kong says the industry is resilient
The Hong Kong Monetary Authority said the city the banking sector is resilient with a powerful capital and liquidity position. Credit Suisse’s operations in the city include a branch regulated by the HKMA and two licensed corporations regulated by the Securities and Futures Commission.
“All of them will open today as usual. Customers can proceed to access their deposits through branches and trading services provided by Credit Suisse in the Hong Kong Equity and Derivatives markets,” said HKMA.
“The overall assets of Credit Suisse, Hong Kong Branch amounted to roughly HKD 100 billion, which is lower than 0.5% of the total assets of the Hong Kong banking sector. The exposures of the local banking sector to Credit Suisse are insignificant,” he added. .
At the end of February 2023, Credit Suisse was the ninth largest listed issuer of structured products in Hong Kong, accounting for around 4% of the total market by market value of units outstanding, HKMA reported.
Singapore says the system is stable
In the same move, Singapore’s monetary authority said Credit Suisse’s operations would proceed in the city-state “without interruption or restriction.”
Credit Suisse customers will proceed to have full access to their accounts and “contracts with contractors will remain in effect. The acquisition shouldn’t affect the stability of Singapore’s banking system.” said GOT.
MAS added that UBS and Credit Suisse don’t serve retail customers as their essential business in Singapore is private and investment banking.
The central bank said it might remain in close contact with Swiss regulators, UBS and Credit Suisse, as the “acquisition is being implemented to facilitate an orderly transition, including addressing any employment impacts.”
Japanese banks ‘shielded’
As for Japan, the deal is unlikely to affect the country’s banking system, said Cyrus Daruwala, managing director of IDC Financial Services.
“I feel exposure to a big wealth manager or asset manager like Credit Suisse or UBS would generally be around 4% of their portfolio,” Daruwala told CNBC’s “Squawk Box Asia” on Monday.
He added that it was not a “significant amount”. “I argue that Japan was relatively protected, especially from Credit Suisse.”
Australian funds ‘strong’
Christopher Kent, deputy governor of the Reserve Bank of Australia, also stressed that domestic banks are sound despite the global panic attributable to the collapse of US banks
“Conditions in global bond markets have been tense recently following the collapse of Silicon Valley Bank in the United States,” he said. in a speech on Monday.
“Voltage in the Australian financial markets has increased, but the markets are still functioning and most significantly, Australian banks are undeniably strong.”
Banks are already well advanced of their bond issuance plans for this yr and should defer “for some time,” Kent said. “Even when markets remain tense… Australian bank issuances will proceed to learn from the strength of their balance sheets.”
Overall, IDC’s Daruwala said banks in the region have “very, little or no” exposure to Credit Suisse. “I do not think it’s making a ripple effect in Asia not less than.”