Asian regulators say banking system is steady after UBS-Credit score Suisse deal

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Regulators in Asia on Monday issued reassuring statements that their banking systems remained robust and stable after Swiss banking giant UBS agreed to buy its rival Credit Suisse for $3.25 billion.

Swiss regulators played a key role in orchestrating the forced takeover to contain a larger banking crisis that would threaten the global system. The deal was announced before markets opened on Monday. Last week, Credit Suisse posted its worst weekly decline since the coronavirus pandemic began.

The developments come shortly after the collapse of Silicon Valley Bank, which prompted US regulators to prop up SVB’s uninsured deposits and offer new funding to troubled banks. The headlines surrounding the global banking turmoil have increased volatility and investor fears of a broader crisis.

Hong Kong says industry is resilient

The Hong Kong Monetary Authority said the city’s banking sector is resilient with strong capital and liquidity positions. Credit Suisse’s operations in the city include a branch regulated by the HKMA and two licensed companies regulated by the Securities and Futures Commission.

“All will be open for business today as usual. Clients can continue to access their deposits using the branch and trading services provided by Credit Suisse for Hong Kong’s equity and derivatives markets,” HKMA said.

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“The total assets of Credit Suisse Hong Kong Branch were approximately HK$100 billion, which is 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,” she added.

At the end of February 2023, Credit Suisse was the ninth-largest issuer of listed structured products in Hong Kong, accounting for about 4% of the total market in terms of market value of outstanding units, HKMA said.

According to Singapore, the system is stable

In a similar move, the Monetary Authority of Singapore said Credit Suisse operations in the city-state would continue “without any interruptions or restrictions.”

Credit Suisse clients will continue to have full access to their accounts and “contracts with counterparties will remain in effect. The acquisition is not expected to have any impact on the stability of Singapore’s banking system,” MAS said.

MAS added that UBS and Credit Suisse do not serve retail clients as their main operations in Singapore are in private banking and investment banking.

The central bank said it will remain in close contact with Swiss regulators, UBS and Credit Suisse as “the acquisition is being conducted to facilitate an orderly transition, including to address any employment implications”.

Japanese banks ‘shielded’

As for Japan, the country’s banking system is unlikely to be affected by the deal, said Cyrus Daruwala, chief executive of IDC Financial Services.

“I think exposure to a big money manager or a money manager like Credit Suisse or UBS would generally be about 4% of their portfolio,” Daruwala told CNBC’s Squawk Box Asia on Monday.

That was “not a significant amount,” he added. “I contend that Japan was relatively shielded, particularly from Credit Suisse.”

Australia’s finances ‘strong’

Christopher Kent, deputy governor of the Reserve Bank of Australia, also stressed that domestic banks are resilient despite the global panic sparked by US bank failures

“Conditions in global bond markets have been tight lately following the collapse of the Silicon Valley bank in the United States,” he said in a speech Monday.

“Volatility in Australian financial markets has increased but the markets are still functioning and most importantly Australian banks are undoubtedly strong.”

Banks are well advanced in their plans for bond issuance for the year and may delay “for a while,” Kent said. “Even if markets remain tight…Australian banks’ issuance will continue to benefit from the strength of their balance sheets.”

Overall, IDC’s Daruwala said banks in the region have “very, very little” exposure to Credit Suisse. “I don’t think there will be a domino effect, at least in Asia.”

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