Relief rally
The completion of the deal has seen UBS downgraded by analysts at Moodys, but that has not prevented a relief rally in the shares both of the Swiss lender, whose stock is up over 3 per cent at the time of pixel, and of banks and equity markets more generally, as contagion fears recede.
March 20
Focus on central banks
Christine Lagarde, president of the European Central Bank, said today the bank is "ready to respond as necessary" to ensure financial stability in the EU.
She told MEPs that the EU's banking sector was "resilient, with strong capital and liquidity positions", and said the takeover of Credit Suisse was “instrumental for restoring orderly market conditions and ensuring financial stability”.
The Bank of England's monetary policy committee is meeting on Thursday (March 23) to discuss whether or not to raise the base rate of interest in the UK.
Advisers have called for stability. Amit Patel, adviser at Trinity Finance, said the BoE must vote to leave rates on hold, or decrease the base rate following UBS's acquisition of Credit Suisse.
"We need financial stability in the UK now more than ever and I think if they were to raise rates then this will catastrophically backfire. We have been here before, and sadly once again it's the ordinary people that will suffer."
Olivier d’Assier, head of Applied Research at Qontigo, said markets are pricing in a 25 basis point rise in the interest rate decision by the BoE, and a similar rise at the Federal Reserve's meeting this week.
"Anything that deviates from this expectation will be interpreted in the context of a declining sentiment and increasingly nervous investors.”
"Major reverberations"
Victoria Scholar, head of investment, Interactive Investor, said: "Investors clearly remain extremely cautious towards the banking sector.
"A key underlying cause has the backdrop of inflation-combative rising interest rates after the longstanding punchbowl of cheap money was removed.
"This is having major negative reverberations across the sector and wider markets globally.”
Bondholders in uproar
Credit Suisse bondholders are in ‘uproar’ and the European Central Bank has raised concerns after $17bn in bonds was wiped out.
Additional tier 1 bank debt (AT1), contingent convertible securities which are seen as a risky form of debt, can be converted into equity if a bank’s capital ratio falls below a certain level.
The Swiss authorities have written down the value of Credit Suisse’s AT1 debt to zero. One AT1 holder told the Financial Times he thinks the move is against the law.
Markets open
Markets opened down after fears grew over the stability of the banking sector after UBS agreed a deal to buy beleaguered fellow Swiss bank, Credit Suisse.
