Credit Suisse rescue fails to calm banking market

Dusseldorf Bank stocks sold off in Asian equities trading on Monday in the wake of the emergency takeover of Credit Suisse, which was accompanied by a devaluation of the institution’s risky AT1 bonds.

The HSBC titles are under particular pressure, falling by up to 6.6 percent and thus more strongly than they have been for almost six months. The bank’s AT1 bonds fell more than five cents. Standard Chartered fell as much as 5.6 percent. Hong Kong’s Hang Seng Index fell 2.7 percent.

Marvin Chen, analyst at Bloomberg Intelligence, said: “The Credit Suisse deal has resulted in significant losses for some bondholders and investors in the region are likely to reassess their exposure to financial market turmoil and risk.”
AT1 bonds issued by some Asian banks fell at an unprecedented rate on Monday after Swiss regulator Finma said that around CHF 16 billion worth of AT1 bonds from Credit Suisse will be written off with the takeover of the bank. The turmoil could put further pressure on the $275 billion bank financing market.
Investors are now trying to figure out how much exposure other banks have to these bonds. In an analysis, Vital Knowledge explained that the takeover of Credit Suisse by the UBS Group will make the overall system stronger and more stable. For holders of AT1 securities from other banks, however, the write-down could lead to fears.

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