Credit Suisse Group AG is more relevant to India’s financial system than Silicon Valley Bank (SVB), according to Jefferies. It said the fate of Credit Suisse is of greater importance to the Indian banking sector than the collapse of SVB.
“Given the relevance of Credit Suisse to India’s banking sector, we see softer adjustments in assessment of counter-party risks, especially in the derivative market. We expect Reserve Bank of India (RBI) to keep close watch on liquidity issues, counter-party exposures and intervene as necessary. This may also lead to institutional deposits moving more towards larger/ quality banks,” the note stated.
“Given the relevance of Credit Suisse to India’s banking sector, we see softer adjustments in assessment of counter-party risks, especially in the derivative market. We expect Reserve Bank of India (RBI) to keep close watch on liquidity issues, counter-party exposures and intervene as necessary. This may also lead to institutional deposits moving more towards larger/ quality banks,” the note stated.
As Credit Suisse “has a major presence in India’s derivatives market”, analyst Prakhar Sharma is watching for any liquidity issues or counter-party risks that may result from the fallout. Overseas banks in India have 4 per cent to 6 per cent of assets but a large 50 per cent share of off-balance sheet liabilities, according to the note.
Credit Suisse owns more than Rs 20,000 ($2.4 billion) of assets in India, making it the 12th largest offshore lender, according to Jefferies. Loans form 73 per cent of its total liabilities in the South Asian nation, with the majority of them of a short tenure, it added.
Credit Suisse’s shares on Wednesday plunged as much as 30 per cent, after its largest shareholder Saudi National Bank (SNB) said it could not provide further support. Saudi National Bank, which holds 9.88 per cent of Credit Suisse, said it would not buy more shares on regulatory grounds.
Switzerland’s second-biggest bank is battling to recover from a string of scandals that have undermined the confidence of investors and clients.
Santander Consumer USA on Wednesday also postponed the sale of bonds worth $942 million that are backed by subprime auto loans as the deepening Credit Suisse Group AG crisis added to turmoil in debt markets, Bloomberg reported on Wednesday.
On Tuesday, March 14, Credit Suisse in its annual report 2022 said it had identified “material weaknesses” in controls over financial reporting and had not yet stemmed customer outflow. It had seen fourth quarter customer outflows rise to more than 110 billion Swiss francs ($120 billion).
Five-year credit default swaps on Credit Suisse debt widened to 574 basis points from 549 bps at last close, based on data from S&P Global Market Intelligence, a new record high.
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