# Bank shares rise after Credit Suisse rescue eases crisis Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-21 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: U.S. Banking Stocks Rise as UBS Group Acquires Credit Meta Description: In a strategic move by Swiss regulators, UBS Group AG pays 3 billion Swiss francs for Credit Suisse, easing concerns and boosting banking stocks globally. URL: https://financedigest.com/bank-shares-rise-after-credit-suisse-rescue-eases-crisishtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-20t094809z2lynxmpej2j0aprtroptp4global-banks-credit-suisse-ubs-1736814295794-compressed.jpg) By Amanda Cooper and John Revill (Reuters) -U.S. banking stocks rose on Monday and Europe’s lenders recovered from a sharp early sell-off after UBS Group’s state-backed takeover of [Credit](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?") Suisse appeared to close off one source of worry for the global banking sector. In a package engineered by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs ($3.2 billion) for 167-year-old [Credit Suisse](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") Group AG, which was once worth more than $90 billion. Bonds issued by major European banks fell after some Credit Suisse bondholders were wiped out in the deal, but UBS shares were 2% higher, bouncing from a 16% slump triggered by concerns about the long-term benefits of the deal and the outlook for Switzerland, once [considered a paragon of sound banking](https://www.financedigest.com/5-things-to-consider-when-choosing-a-challenger-bank.html "5 Things to Consider When Choosing a Challenger Bank"). [European bank shares](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") climbed into positive territory while shares in U.S. [financial giants Citigroup and JPMorgan Chase](https://www.financedigest.com/the-chase-is-on-for-more-alternative-data-within-financial-services.html "The chase is on for more alternative data within financial services") rose 2.7% and 2.6% respectively. There (is) more good news than [bad news on the banking](https://www.financedigest.com/alpha-bank-to-sell-bad-loan-portfolio-to-fortress-and-davidson-kempner.html "Alpha Bank to sell bad loan portfolio to Fortress and Davidson Kempner") front,” said Art Hogan, chief market strategist at B. Riley Wealth. First and foremost, the [Credit Suisse](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse billion lifeline offers limited respite to global banks"), UBS merger certainly takes a lot of stress out of the global banking system,” Hogan said. Policymakers from Washington to Europe have asserted that the current turmoil is different than the global financial [crisis 15 years ago as banks](https://www.financedigest.com/how-the-2023-banking-crisis-unfolded.html "How the 2023 banking crisis unfolded") are better capitalised and funds more easily available. Hogan said a [deal on Sunday for a unit of New York Community Bancorp to buy deposits and loans from the failed Signature Bank](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad") also boosted sentiment in U.S. banks. New York Community Bancorp shares surged 36% at the [Wall Street](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease") open. Investor focus in Europe shifted to the massive blow some Credit Suisse bondholders will take, prompting euro zone and UK banking supervisors to try to stop a rout in the [market](https://www.financedigest.com/in-a-rising-market-are-banking-outsourcers-pulling-their-weight.html "In a rising market, are banking outsourcers pulling their weight?") for convertible bank bonds. The regulators said owners of this type of debt would only suffer losses after shareholders have been wiped out – unlike at [Credit Suisse](https://www.financedigest.com/some-credit-suisse-at1-bondholders-seek-legal-advice-law-firms.html "Some Credit Suisse AT1 bondholders seek legal advice -law firms"), whose main regulators are in Switzerland. CO-ORDINATED ACTION To prevent the banking jitters from snowballing into a bigger crisis, top central [banks promised over the weekend to provide dollar liquidity](https://www.financedigest.com/boes-bailey-says-bank-reforms-worked-but-questions-about-liquidity-buffers.html "BoE’s Bailey says bank reforms worked but questions about liquidity buffers") to stabilise the financial system. In a [global response not seen since the height of the pandemic](https://www.financedigest.com/how-to-improve-sales-during-a-global-pandemic.html "How to improve sales during a global pandemic"), the U.S. Federal Reserve said it had joined central [banks in Canada](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates"), Britain, Japan, the euro zone and Switzerland in a co-ordinated action to enhance market liquidity. The Fed’s relentless [rate hikes to quash inflation](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February") were seen as a trigger for the collapse of U.S. mid-sized lenders [Silicon Valley Bank and Signature](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources") Bank last month, and traders have now increased their bets that the central bank will pause its hiking cycle on Wednesday to try to ensure financial stability. There are still worries despite several large banks depositing $30 [billion](https://www.financedigest.com/20-billion-in-bank-service-fees-are-you-overpaying.html " Billion in Bank Service Fees: Are You Overpaying?") into First Republic Bank, the lender currently drawing the most concern from U.S. investors. S&P Global downgraded First Republic’s credit ratings deeper into junk on Sunday, [saying the deposit infusion may not solve](https://www.financedigest.com/german-minister-says-on-right-track-to-solving-co2-emitting-car-row.html "German minister says ‘on right track’ to solving CO2-emitting car row") its liquidity problems. Its shares fell 16% in early U.S. dealing on Monday. Other regional U.S. lenders largely bucked the trend. PacWest Bankcorp [jumped 17% after saying deposit outflows had stabilised and its available cash](https://www.financedigest.com/orpea-shares-jump-on-q4-revenue-and-cash-boost.html "Orpea shares jump on Q4 revenue and cash boost") exceeded total uninsured deposits. QUESTIONS FOR UBS The shotgun Swiss [banking marriage is backed](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") by a massive government guarantee, helping prevent what would have been one of the largest banking collapses since the fall of Lehman Brothers in 2008. However, the [Swiss regulator decided Credit Suisse’s](https://www.financedigest.com/swiss-franc-grapples-with-safe-haven-identity-crisis-after-credit-suisse.html "Swiss franc grapples with safe-haven identity crisis after Credit Suisse") additional tier-1 (AT1) bonds with a notional value of $17 billion will be valued at zero, angering some holders of the debt who thought they would be better protected than shareholders. [AT1 bonds](https://www.financedigest.com/stanchart-ceo-says-at1-bond-wipeout-has-profound-impact.html "StanChart CEO says AT1 bond wipeout has profound impact") – a $275 billion sector also known as “contingent convertibles” or “CoCo” bonds – can be converted into equity or written off if a bank’s capital level falls below a certain threshold. The deal will also make UBS Switzerland’s only global bank and the Swiss economy more dependent on a [single lender](https://www.financedigest.com/is-googles-payday-lender-ad-ban-singling-out-the-industry.html "Is Google’s payday lender ad ban singling out the industry?"). One man who walked out of [Credit Suisse’s](https://www.financedigest.com/ubs-makes-changes-to-buyback-programme-following-credit-suisse-takeover.html "UBS makes changes to buyback programme following Credit Suisse takeover") London office on Monday told Reuters that the atmosphere inside the building was “business as usual. When you [work in banking](https://www.financedigest.com/working-with-banks-essential-tips-for-fintechstartups.html "Working with banks – essential tips for fintechstartups"), these things happen, and there’s no point worrying,” he said, refusing to give any further details. Other staff in [Hong Kong](https://www.financedigest.com/hong-kong-finance-official-to-make-first-visit-to-britain-in-three-years.html "Hong Kong finance official to make first visit to Britain in three years") and Singapore fretted about retrenchments and retaining business. Switzerland’s two biggest political parties sharply criticised the takeover, [saying huge state support – which could add up to $280 billion – created enormous risks](https://www.financedigest.com/british-doctors-strikes-risk-patient-safety-minister-says.html "British doctors’ strikes risk patient safety, minister says") for the country. “What has happened is terrible for the credibility of Switzerland,” said Roger Nordmann, leader of the Social Democrats in the Swiss parliament. It’s a warning shot for Switzerland about having [banks which are just too big.”](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") ($1 = 0.9280 Swiss francs) (Shubham Batra, Amruta Khandekar and Ankika Biswas in Bengaluru and Stefania Spezzati, Oliver Hirt and John O’Donnell in Zurich; Additional [reporting by Karin Strohecker and Reuters](https://www.financedigest.com/indonesia-to-tighten-used-shoe-import-controls-after-reuters-report.html "Indonesia to tighten used shoe import controls after Reuters report") bureaus; Writing by Sam Holmes and Toby Chopra; Editing by Muralikumar Anantharaman, Kirsten Donovan) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---