Securities Finance Times’ Post

In the latest post on the Suara SEACEN blog, Amarendra Mohan writes on the Loss Absorbency of Additional Tier 1 Capital Instruments under Basel III: The Credit Suisse Case: The sophisticated investors in Credit Suisse AT1 bonds were surprised that the Additional Tier1 (AT1) bonds absorbed losses before equity shares. But this is precisely what is envisaged under Basel III to restore a bank to viability in a “going concern” context, and the terms of issuance of Credit Suisse AT1 bonds mentioned that this is possible in the case of a “viability event”. Read more at https://lnkd.in/gyx7knEH

AT1 Bonds are perpetual callable bonds created from Basel III regulations to absorb losses of banks on going-concern basis and thus shield depositors and tax-payers. However, there has always been a discussion and debate over the marketing of such bonds to investors, risk-return spectrum, statutory vs contractual conditions to absorb losses, inversion of creditor hierarchy, and actual actions taken outside resolution by various regulatory entities in crisis scenarios. The FSI Brief from BIS is a structured read for placing all such debates and practices in global perspective and as the appetite for AT1 bonds stabilizes, whether the current design of AT1 instruments remain fit for purpose and whether investors are apprised of the inherent risks of write-down even before PONV is reached outside of resolution. https://lnkd.in/di4ai65S

Saxo Pros/Cons: 👍 Systemic Bank In Denmark 👍 Reporting On Par With Listed Companies 👍 Multiple Banking Licences 👍 Competitive Transaction Fees ⌛ Automatic Investing Not Yet Rolled Out 😕Fees/Features Not unified across the EU 😕Security Lending Required To Waive Custody Fees In Certain EU Countries 🚩Prohibitive Custody Fees In The UK Saxo Bank https://lnkd.in/eSCvWtsz

Exciting developments are on the horizon for the repo market, as efforts towards modernisation gain momentum. The Banker reports that a lack of standardisation, reliance on intermediaries, and post-trade complexities have hindered the repo market's progress. However, positive change is anticipated. To learn more about the potential advancements in efficiency and accessibility, check out Camille McKelvey's insights here: https://okt.to/CyBevd #Repo #Innovation

UBS AT1 Bonds yield premia vanish to align to non-Swiss issuers bond yields.  It is a reflection of investors’ expectation that Swiss Authorities will not recur again to an isolated writedown of AT1 instruments using the “qualitative” non viability trigger. An isolated writedown of AT1 instruments is possible in jurisdictions such as EU, United Kingdom, Switzerland and Japan under a “quantitative” trigger. However, the CS acquisition from UBS was structured as a “commercial transaction” outside the scope of a resolution framework, thus creating an unwanted transfer of value from AT1 bondholders to shareholders.

The banking reform Switzerland’s government proposed yesterday addresses a very specific problem which came up during the demise of Credit Suisse: the capitalization of a big bank’s foreign units. Selling those was essentially impossible during the crisis as that would have significantially weakened the parent bank‘s capital levels. So, even though #UBS seems to have fought with all it had against higher capital requirements, the government actually has a good case for the changes it proposes. #Switzerland #Banking #CreditSuisse

Meanwhile, in the Silver Hall, Cassandra Jones, CFA, Managing Director, EMEA Head of Financing Solutions Client Manager at State Street, led a panel discussing the state of play and outlook of the global repo market. Our panellists explored the current state of play in the repo markets, how funding and liquidity is shaping up for the year and the market dynamics of supply and demand. The panel also discussed the volatility and challenges facing the repo market, including the importance of ensuring that liquidity is allocated where it is needed most. Key to the conversation was the importance of ensuring the repo market is up-to-date in terms of technology, given that it often last in line to receive technological investment. In addition, the panel discussed the implications of T+1 on the repo space, and why repo will have to adapt quickly to this. From post-execution to settlement, there is a wide variety of steps that take place separately for different counterparties. All this is carried out semi-manually and, therefore, moving to T+1 means all this activity leading up to settlement will need to take place in a shorter space of time. The panel included: Andreas Biewald, Managing Director, Senior Advisor Cash and Collateral, Treasury Department, Commerzbank AG Sara Carter, Global Head of Repo Brokertech Thomas Hansen, Managing Director and Head of Term Markets at Santander #ICMAAGM2024 #Brussels #global #Europe #joinus #capitalmarkets #event #csuite #repo

Swiss Roll Well, it looks like the bank regulators in Switzerland either have a greater understanding of market risk than their peers on " the other side of the pond " So, while Switzerland will implement the new "Basel 3 " capital rules on schedule, the Fed is backpedaling furiously to heavily water down those newly mandated capital allocations so that its friends in Wall Street can write up even more share buybacks to juice their stock price and enrich themselves accordingly. The Federal Reserve is not fit for purpose. https://lnkd.in/eqUk-FaV #capitalrules #sharebuybacks #ubs #federalreserve #jaypowell #marketrisk

What drives the recent surge in AT1 issuance among European banks? In 2024, €11.6bn gross issuance hints at underlying trends. While recent calls reflect strategic shifts, the muted net supply echoes broader regulatory capital optimization. This nuanced landscape suggests a supportive environment for AT1 valuations, potentially leading to a scarcity premium. My colleauges from TwentyFour Asset Management LLP delve deeper into the implications for professional investors navigating these dynamic markets⬇️ #AT1Issuance #EuropeanBanks #Investing #MarketTrends https://bit.ly/3X1sSfk

Why private equity has been involved in every recent bank deal   “Speed and discretion are key to these deals, according to advisors to several recent transactions and external experts. While selling stock into public markets could theoretically be a cheaper source of capital, it’s simply not available to most banks right now.” Link: NYCB: Why private equity has been involved in every recent bank deal (cnbc.com)   Image reference: Image by: https://lnkd.in/dF8hEmaz