Making Sense

UBS today announced the takeover of Credit Suisse. Swiss Federal Department of Finance, the Swiss National Bank and the Swiss Financial Market Supervisory Authority FINMA (FINMA) all came together to facilitate this takeover. Credit Suisse has been informed by FINMA that FINMA has determined that Credit Suisse’s Additional Tier 1 Capital  (deriving from the issuance of Tier 1 Capital Notes) in the aggregate nominal amount of approximately CHF 16 billion will be written off to zero.  C redit Suisse and UBS can obtain a liquidity assistance loan with privileged creditor status in bankruptcy for a total amount of up to CHF 100 billion.   Furthermore, and based on the Federal Council’s Emergency Ordinance, the SNB can grant Credit Suisse a liquidity assistance loan of up to CHF 100 billion backed by a federal default guarantee. The structure of the loan is based on the Public Liquidity Backstop (PLB). Write off of AT1 bonds sparked a massive risk aversion across marke...

  "The only limit to our realization of tomorrow will be our doubts of today." Yesterday, US released the Advance Retail Sales data. Adv Retail Sales and Food Services Data fell 0.40% mom against consensus estimates of a 0.30% contraction and following a revised 3.20% in the month of January 2023. Compared to Dec 22, Retail Sales are up 2.81%. The data offers limited insight. US also released the PPI data which fell 0.10% mom against consensus estimates of a rise of 0.30% following a downward revision to the Jan number to 0.30% rise from earlier reported 0.70% rise. This is seen as a welcome moderation in the data. Overnight we saw the market deeply concerned about the contagion risk moving to European Banks. European Banking index was down 8.40% with concerns centred around Credit Suisse. Later, during the day, FINMA and SNB issued a statement expressing comfort on the Credit Suisse capital and liquidity metrics. SNB offered a $ 54 bn covered loan facility to the bank. At th...