Rick’s note on Credit Suisse situation 

Rick’s note on Credit Suisse situation 

Whilst Pactum worked very closely with the great guys and girls at Credit Suisse in our early days, loss of investor confidence in CS post Greensill has meant that our paths have diverged in the interim period and we have no current operational exposure.

Obviously, clients are asking what we think the fallout will be from the merger/ takeover/ forced marriage/ call it what you will: but unfortunately, it is too soon to tell the implications for the markets, although it is clear that there will be a lot of litigation if the AT1 holders are really rendered to zero above the equity investors. This will go on for years to come.

The implications for bank funding and therefore the access to liquidity for bank clients could be very restricted as well for some time since regulators will be keen to see banks shoring up their balance sheets against any further “wobbles” and this will severely limit new lending. 

As for our views on the deal itself? It does seem to be a very strange marriage and we are surprised that JP Morgan or others have not tried to get the same deal from FINMA, but without the obvious clash in the highstreets of every Swiss town or village: The duplication level between the CS and UBS being such that in this deal one plus one will never equal two and may not equal more than about one and a quarter… thus leaving an awful lot of good people looking for new jobs not only here in CH but also abroad. Combined with the creation of a Swiss behemoth that is way too big compared to the size of the Swiss economy, and hence is too big to fail (or too big to save), we will admit, the logic of this marriage is lost on us unless we are heading to a new paradigm where banking is effectively run by individual governments via one national champion: not ideal for competition and free markets… 

In the meantime, to all our old friends at Credit Suisse, please do not hesitate to reach out if we can support you in any way.