Despite news that UBS would acquire troubled Swiss bank Credit Suisse in order to stem global financial turmoil, Asia-Pacific markets were largely downcast on Monday.
The 225-issue Nikkei average, Hong Kong’s Hang Seng and Australia’s S&P/ASX were all down, as turbulence in the banking sector continued to cast a shadow. The Nikkei closed at 26,945.67, down 1.42% from Friday.
Following the collapse of two midsize banks in the U.S., the global banking sector has been closely watching for signs of contagion, while officials have sought to offer reassurance.
On Sunday, the Federal Reserve announced it had joined with banks including the Bank of Japan, the Bank of England, the European Central Bank and the Swiss National Bank to form a joint liquidity operation that would allow for increased frequency of U.S. dollar swaps in order to ensure lenders have sufficient access to dollars.
Japan’s Chief Cabinet Secretary Hirokazu Matsuno welcomed the arrangement, while also reaffirming that the banking system is stable and that Japan isn’t at risk of contagion following the U.S. and European banking turmoil.
While Japan’s major banks have seen underwhelming market performance, regulatory or government-level shifts have not been sought, as experts say the events which led to the collapse of the U.S. midsize banks were the result of specific market conditions.
Last week, global attention was drawn to Credit Suisse after the bank’s largest shareholder ruled out further financial assistance, causing the bank’s already downward-trending shares to plunge to record lows.
The day prior, the bank had released its 2022 Annual Report, which warned of “material weakness” in its financial statements that could “result in misstatements of account balances or disclosures.”
On Sunday, UBS — with the support of Swiss regulators — announced its 3 billion Swiss franc ($3.25 billion) rescue of its rival, while a statement from Credit Suisse sought to reassure clients by describing it as a “merger” that will allow the bank to “continue to conduct its business in the usual way, in close collaboration with UBS.”
Credit Suisse is considered a “global systematically important bank,” meaning its failure would trigger a wider financial crisis.
Elsewhere in Asia, regulators have sought to reassure markets.
The Monetary Authority of Singapore released a statement Monday saying that Credit Suisse will “continue operating in Singapore with no interruptions or restrictions, following the announced takeover by UBS.”
“The takeover is not expected to have an impact on the stability of Singapore’s banking system,” the statement said.
The same day, the Hong Kong Monetary Authority and the Securities and Futures Commission said Credit Suisse’s operations in Hong Kong will all be “open for business today as usual.”
Christine Lagarde, president of the European Central Bank, said on Sunday that the “Euro area banking sector is resilient, with strong capital and liquidity positions.”
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