When Central Banks gathered in Washington, Frankfurt, and London last week, their central focus was response strategies to contain a double-headed crisis: hard-to-abate inflation and the potential onset of a global financial crisis. The focus was particularly sharp on monetary aggregates, financial conditions in the credit default swap markets and, in the case of the Fed in Washington, the volume uptake of the Bank Term Funding program. This collateralized relief program was created by the Fed in the aftermath of the Silicon Valley Bank collapse.
That same weekend Bern-based Swiss FINMA regulators and the Swiss Central Bank, in close cooperation with shareholders, key executives and global central banks, salvaged the fate of Credit Suisse (CS) by authorizing UBS to acquire the scandal ridden entity for $3 billion CHF. Topics “du jour” were the fate of the Credit Suisse as an independent institution and its CoCos. The $17 billion contingent convertible capital instruments, while senior to equity, were fully marked down to zero per regulatory language provisions of the instrument. The markdown protected the remaining CS common stockholder, prior to the takeover by UBS, but left many observers puzzled.
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