Credit Suisse rescue: HSBC, Standard Chartered regulator tries to reassure bondholders

Name: Silicon Valley Bank collapse stuns tech firms around the world, global operations dismantled
Uploaded: 2023-03-20T17:14:03.000Z
Duration: 2 min 30 s
Description: Silicon Valley Bank collapse stuns tech firms around the world, global operations dismantled

Bank of England, European Central Bank say shareholders will bear losses before bondholders in bank insolvencies

Move to calm markets comes after Swiss authorities wipe out about US$17 billion of Credit Suisse’s debt as part of negotiated rescue

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A woman with an umbrella stands in front of the Bank of England on Threadneedle Street in the City of London in November 2022 in this file photo. Photo: AP

Chad Brayin London

Published: 1:14am, 21 Mar 2023Updated: 2:34am, 21 Mar 2023

European banking supervisors, including the chief regulator for HSBC and Standard Chartered, sought to reassure bondholders on Monday about the adequacy of a class of riskier debt created to help avoid future bank bailouts after Credit Suisse’s regulator moved to wipe out some US$17 billion of the lender’s bonds.

The European Central Bank and the Bank of England separately issued statements outlining the hierarchy for how shareholders and debtholders will bear losses in a bank insolvency.

“Common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier 1 be required to be written down,” the ECB said in a statement.

“This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions.”

The Bank of England, which regulates two of Hong Kong’s biggest banks, HSBC and Standard Chartered, separately said, “The UK’s bank resolution framework has a clear statutory order in which shareholders and creditors would bear losses in a resolution or insolvency scenario.”

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Silicon Valley Bank collapse stuns tech firms around the world, global operations dismantled

Over the weekend, the Swiss National Bank negotiated a rescue of Credit Suisse by larger Swiss rival UBS after the bank faced a crisis of confidence following the collapse of Silicon Valley Bank and another midsize US lender unnerved financial markets.