I am sure you would be aware of what has been going on these few days or from last week, from Silicon Valley Bank facing difficulties to cover withdrawals due to how they manage the deposits and failing to meet the withdrawals to Signature Bank collapsing and other regional banks like First Republic facing huge amount of withdrawals as fear spread after the news of SVB and depositers worrying about their capital.
This week, we saw Credit Suisse a global systemically important bank (G-SIBs) facing difficulties as large amounts have been withdrawn from the bank and it's biggest investor saying that they will not be buying more shares as they do not want to be holding more than 10% as it is a regulatory issue which sent their share price on a downward trend.
Last year, Credit Suisse did show some warning signs regarding their liquidity issues as they saw huge amount of outflows however following the SVB and other smaller banks collapse recently, coupled with higher interest rates, Credit Suisse is not looking good at the moment. They did get a $54 billion loan from the Swiss National Bank where the shares did slightly recover but over this weekend, news outlets are reporting that UBS is planning or eyeing on buying over Credit Suisse.
Nothing is concrete right now on the Credit Suisse situation. Over the past week, we do see a lot of intervention from the bigger guys, from the Fed announcing that SVB depositors will be repaid in whole even if they had deposited more than the FDIC insured $250,000 amount which is crazy if you think about it. The amount is massive and who exactly is footing the bill?
Next, HSBC bought over the SVB UK arm for £1. From this CNA article, "Asked about HSBC's white-knight role, Hunt said the finance ministry's priority had been to avoid using British taxpayers' money. SVB UK is ring-fenced from the US group, and HSBC said the assets and liabilities of the parent company were excluded from the transaction. SVB UK has loans of around £5.5 billion and deposits of around £6.7 billion, HSBC said, adding the takeover completes immediately. The Bank of England said SVB UK had a total balance sheet size of around £8.8 billion."
To be honest, depositors would have lost confidence in SVB even if the UK arm is all right and ring-fenced from the US side as the name has already been "tainted", instead, matching it to a stronger and bigger bank like HSBC brings it a backing and support. From reading the article, HSBC seems to have gotten a good deal although I would think there might be other issues but I am not an expert in mergers and acquisitions so I might be wrong.
My thoughts
I have learned more about the banking industry and how trigger events can cascade into bad situations, also how banks handle client's deposit can affect their liquidity. Interesting to know that a buildup of tough macro-environment can trigger events to happen. With this Credit Suisse saga, it does reflect to me that it is more of a see and wait situation, as we see how things pan out.
Hey news reader and memes investor aka cutie out there, first of all, it's "systemically" important banks. Second, Credit Suisse was in trouble long before, try to search (note that I didn't say Google ;)) "Credit Suisse" together with keywords like "Archegos", "Greensill", and "FTX COO" and you will find something entertaining. Lastly, why am I so smart? Why am I still not the King of Wall Street, or Prime Minister of Singapore? Is it because I wasted too much time on leaving comments on your blog?
ReplyDeleteIts because you always forget to take your meds
DeleteThis comment has been removed by a blog administrator.
DeleteFor a moment, I thought your blog is titled "Singaporean likes money"...
ReplyDeleteI always have so much to say on whatever topics w.r.t. money, even though personally I am not interested in money per se. Maybe I need to stop following your blog and get back to work.
DeleteOh, and if you ask me, I'm buying 50k of bitcoin ASAP if not today. Balaji, ex-CTO of Coinbase, bet 1mm that it will go to 1mm dollars by end of Q2. I doubt it. But I don't want to miss it.
DeleteAh oh, turns out the above is a no-op, for reason: 1) if America has to go under, everyone else must suffer first! 2) Balaji has a ph.d. in eecs, that is, he is a tech guy, and why would anyone in their right minds turn to a tech guy for financial advice? 3) look at his name, Balaji, apparently he is not a true American so he can feel free to short America but we don't! I, as a Singaporean, pledge myself to stand unitedly with the great America!
Delete对了,如果你能看懂中文的话,这里有篇硅谷银行的深度报道:https://wallstreetcn.com/articles/3684270
ReplyDeleteSpoiler alert: it's Goldman Sachs, again!
DeleteSomeone once told me that he "made" 250mm dollars during 2008 while working at Goldman, but unfortunately the other side was Lehman.
DeleteJohn Paulson did pull of 15 billion dollars with the greatest trade ever, though.
Deleteoff*
Delete