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This deal stinks of panic. I know they’re rushing to calm the market but I think it will have the opposite Streisand effect. Last week it was 30B CHF now they’r
by lvl102 4y ago
This deal stinks of panic. I know they’re rushing to calm the market but I think it will have the opposite Streisand effect. Last week it was 30B CHF now they’re throwing 100B CHF to make it work? Something is terribly wrong with CS book.
- throway514 4y agoSorry, I can’t see anywhere in the article where they mention 100B. I’m I misunderstanding something?
- _trampeltier 4y agoIt's just for liquidity. If someone want's money, the banc can't give them a part of a house (where they give the credit).
- rspoerri 4y ago100 Billion Swiss Franks (CHF) is the safety the National Bank is providing to Credit Suisse and UBS. It is not the purchase price. The purchase price is 3B CHF.
- lvl102 4y agoYes, and last week the backstop was 30B CHF. So why did they increase that by more than 3x within days? Makes no sense other than UBS finally looked at the books and freaked out.
- rspoerri 4y agoUBS cant decide on that. The swiss goverment has to, and apparently it decided to make it more secure, because the market did not trust it's previous safety net.
- TuringNYC 4y ago>> Yes, and last week the backstop was 30B CHF. So why did they increase that by more than 3x within days? Makes no sense other than UBS finally looked at the books and freaked out. There were likely internal (to CS) marks based on assumptions. The assumptions may have assumed baseline market conditions. External parties came in and didnt want to assume baseline market conditions and/or didnt agree with the assumptions, so they were changed to more conservative figures, and new marks came out. The new marks were significantly lower. They have veto power over the deal and the government was forced to backstop to make the deal happen.
- jcfrei 4y agoNo, the 100B CHF is just to bridge the liquidity. If they didn't provide this then Credit Suisse might need to sell a big chunk of its bond portfolio for further withdrawals - which would incur a big loss compared to holding the bonds until maturity. Same issue and fix as for Silicon Valley Bank. I don't know the terms for accessing this emergency liquidity but I assume it's not going to be cheap.
- londons_explore 4y agoAt market rates, it should cost the same as selling the bonds now. And selling the bonds now would put them in the red. So either they have been given better-than-market rates, or they're pulling some other accounting trick to make it look like there is more of value here than there really is...
- bartvk 4y ago> At market rates, it should cost the same as selling the bonds now. You assume that the spread is zero and that there are actually buyers. But I might be wrong here, I don't know about the liquidity of these bonds.
- dafrie 4y agoas just confirmed in the press conference, the overall liquidity safety net is actually 200B CHF from SNB. Then 9B of guarantees from the Swiss government to UBS for potential risks
- lvl102 4y agoThis deal makes no sense. They also wrote down some creditors to zero while equity holders got at least a few cents. Edit: and now CBs come out with additional coordinated measure.
- ivalm 4y agoI’m not sure how Streisand effect is relevant here. Sufficiently large backstop removes panic because if the govnmt backstops enough there can’t be a loss for depositors. It’s always a balance between safety of depositors and liability of the government. But increasing backstop just ensures that depositors are ever safer.
- lvl102 4y agoPTSD from 2008 is very real. People will act first think later.
- deleted 4y ago[deleted]
- FormerBandmate 4y agoCredit Suisse is being sold for 70% lower than its price on Friday. Twitter is worth 13 Credit Suisses lmao. They’re clearly insolvent without this, no? The Swiss government forced UBS to do this at gunpoint, why else would they do that