4 ms·

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 book

by lvl102 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.

rspoerri 4y ago
UBS 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 ago
No, 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 ago
  At 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.

by lvl102 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.

rspoerri 4y ago

UBS 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 ago

No, 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 ago
At 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.