UBS share price

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“The capital and liquidity positions of the U.S. The phrase too big to fail really does spring to mind here, and this morning’s weakness in Asia markets serves to reinforce concerns about these types of writedowns and any spillover effects on the rest of the banking sector. The many scandals at Credit Suisse in recent years have tainted Switzerland’s financial sector. So we have contained the risks in the markets. Credit Suisse is a 167 year old institution that has been instrumental to the growth of the Swiss economy. Some $17bn of risky bonds issued by Credit Suisse are being wiped out as part of the deal. There is also a risk of spillover effect on global credit (although we note that senior secured bonds seem quite resilient including CS senior secured bonds which are jumping in price this morning). They pushed down US government bond prices, which was the cause of the losses at Silicon Valley Bank which failed earlier this month. These are ‘contingent convertible’ bonds that are riskier than other debt instruments and designed to get wiped out in a crisis – or converted to equity. Typically, AT1 bonds is meant to be above equity in the debt heirachy. In particular, common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier One be required to be written down. The deal hammered out yesterday sees UBS pay almost $3.25bn (£2.65bn) for Credit Suisse, or 0.76 Swiss francs per share in its own stock.