Digital Zeitgeist – Thousands Of Jobs In The City Might Be Lost As A Result Of The Ongoing Crisis At Credit Suisse And UBS’s Acquisition of The Troubled Bank
An industry professional projected on Monday that as a result of UBS’s acquisition of Credit Suisse, a number of positions in investment banking, back offices, and technology would be eliminated in London.
Mark Yallop, who served as the chief executive of UBS in the UK for many years, is another person who has brought up the possibility that there is more to learn about the dangers surrounding Credit Suisse than what is now known to the public.
On the other hand, he is of the opinion that the banking industry should be stabilised as a result of the sale of the bank to its competitor as well as the involvement by financial institutions.
He told BBC Radio 4’s Today programme: “The two firms together employ about 120,000 staff worldwide, of which about 11,000 sit here in London.
“I think it’s inevitable that a merger of this sort will result in some further job losses.
“I would imagine those would be concentrated in the risky investment banking business at Credit Suisse which is partly the cause of the problems that the firm is experiencing and in middle, back office, technology and operational roles where bringing two firms together will mean you can run one bigger firm without doubling up the infrastructure needed to manage it.”
He did not provide a number for the amount of prospective job losses; nevertheless, several industry professionals anticipate that there would be a loss of around 2,000 jobs.
Mr Yallop, who is currently the chairman of the Fixed Income, Currency, and Commodities or FICC Markets Standards Board, is of the opinion that the crisis at Credit Suisse may still have further repercussions.
“Looking at what has been released about the terms of the deal, it seems like an attractive transaction for UBS and its shareholders, but obviously the fact that it is so attractively priced suggests that potentially there is more risk sitting on the Credit Suisse balance sheet than perhaps has been visible publicly up until now,” he said.
When asked whether the actions that have been taken up to this point to stem the spread of the contagion in the financial sector should comfort the markets, he said, “It should do.”
“This is a takeover of a challenged institution with particular idiosyncratic problems that relate to it specifically, not reflective of broader issues in the banking market.
“This transaction will definitely stabilise it and should bring a good degree of confidence back to the banking market more generally.”
He went on to say that non-systemic and smaller banks faced difficulties due to rising interest rates.
Nonetheless, he emphasised that the present banking troubles do not bring back memories of the financial crisis that occurred in 2008.
“The world is a very different place today,” he explained.
“We have had a decade of regulatory change and strengthening of bank balance sheets since 2008, more than a decade.
“So, individual banks are in a much stronger position now. They have at least three times more capital than they had back 15 years ago.
“The whole banking system is much less interconnected and bound up together than it was back in those days and we are not at the end as we were in 2008 of a prolonged property related boom and increase in property related debt.
“So I think the situation is genuinely very different.”
When competitor UBS reached an agreement over the weekend to acquire the 167-year-old bank Credit Suisse for a price that is a mere fraction of its current market value and with substantial backstops from the Swiss government, investors dumped Credit Suisse shares and bonds on Monday.
Credit Suisse shares slid by almost 62 per cent in Swiss premarket trading to around 0.61 Swiss francs (£0.54), while the value of its additional tier 1 (AT1) bonds – a type of contingent convertible bonds that is considered to be the riskiest type of debt banks can use – dropped as low as 1% on the dollar after the bank said 16 billion Swiss francs worth of the debt will be written down to zero.
As part of its rescue merger with UBS, the debt is being written down on the demands of the Swiss regulator, it was reported on Sunday, which infuriated bondholders. The merger is intended to save the company.
UBS will pay 3 billion Swiss francs (about £2.65 billion) for Credit Suisse as part of a deal that was arranged by Swiss authorities on Sunday. UBS will also accept losses totaling 4.43 billion Swiss francs.
When a proposal for Credit Suisse to borrow up to 50 billion francs (£44.3 billion) failed to satisfy investors and the bank’s clients, the Swiss authorities pushed for UBS to take over its smaller competitor.
After news of the agreement in Switzerland, central banks throughout the globe, including the Bank of England, made synchronised announcements about financial actions that would be taken the next week in order to stabilise banks. This involves providing banks with daily access to a lending facility in the event that the banks have a need to borrow US dollars, a strategy that was frequently used during the financial crisis that occurred in 2008.
On Monday morning, when the Swiss authorities revealed that they had negotiated a rescue plan for Credit Suisse, the value of the FTSE 100 fell by close to 2%.
The most important index in London had a drop of as much as 129 points immediately after the markets opened, with the largest banks in the nation leading the decline downward.
At one time, the value of Standard Chartered’s shares had dropped by more than 7%, while that of Barclays’ had dropped by just under 6%.
Earlier this morning, the markets in Asia were showing signs of weakness, with shares in Hong Kong plunging by more than 3% as the banking sector took a beating. Other markets in Asia also struggled.
That paves the way for what might be another gloomy week for markets throughout the world.
online sources: theguardian.com, uk.news.yahoo.com
An industry professional projected on Monday that as a result of UBS’s acquisition of Credit Suisse, a number of positions in investment banking, back offices, and technology would be eliminated in London.
Mark Yallop, who served as the chief executive of UBS in the UK for many years, is another person who has brought up the possibility that there is more to learn about the dangers surrounding Credit Suisse than what is now known to the public.
On the other hand, he is of the opinion that the banking industry should be stabilised as a result of the sale of the bank to its competitor as well as the involvement by financial institutions.
He told BBC Radio 4’s Today programme: “The two firms together employ about 120,000 staff worldwide, of which about 11,000 sit here in London.
“I think it’s inevitable that a merger of this sort will result in some further job losses.
“I would imagine those would be concentrated in the risky investment banking business at Credit Suisse which is partly the cause of the problems that the firm is experiencing and in middle, back office, technology and operational roles where bringing two firms together will mean you can run one bigger firm without doubling up the infrastructure needed to manage it.”
He did not provide a number for the amount of prospective job losses; nevertheless, several industry professionals anticipate that there would be a loss of around 2,000 jobs.
Mr Yallop, who is currently the chairman of the Fixed Income, Currency, and Commodities or FICC Markets Standards Board, is of the opinion that the crisis at Credit Suisse may still have further repercussions.
“Looking at what has been released about the terms of the deal, it seems like an attractive transaction for UBS and its shareholders, but obviously the fact that it is so attractively priced suggests that potentially there is more risk sitting on the Credit Suisse balance sheet than perhaps has been visible publicly up until now,” he said.
When asked whether the actions that have been taken up to this point to stem the spread of the contagion in the financial sector should comfort the markets, he said, “It should do.”
“This is a takeover of a challenged institution with particular idiosyncratic problems that relate to it specifically, not reflective of broader issues in the banking market.
“This transaction will definitely stabilise it and should bring a good degree of confidence back to the banking market more generally.”
He went on to say that non-systemic and smaller banks faced difficulties due to rising interest rates.
Nonetheless, he emphasised that the present banking troubles do not bring back memories of the financial crisis that occurred in 2008.
“The world is a very different place today,” he explained.
“We have had a decade of regulatory change and strengthening of bank balance sheets since 2008, more than a decade.
“So, individual banks are in a much stronger position now. They have at least three times more capital than they had back 15 years ago.
“The whole banking system is much less interconnected and bound up together than it was back in those days and we are not at the end as we were in 2008 of a prolonged property related boom and increase in property related debt.
“So I think the situation is genuinely very different.”
When competitor UBS reached an agreement over the weekend to acquire the 167-year-old bank Credit Suisse for a price that is a mere fraction of its current market value and with substantial backstops from the Swiss government, investors dumped Credit Suisse shares and bonds on Monday.
Credit Suisse shares slid by almost 62 per cent in Swiss premarket trading to around 0.61 Swiss francs (£0.54), while the value of its additional tier 1 (AT1) bonds – a type of contingent convertible bonds that is considered to be the riskiest type of debt banks can use – dropped as low as 1% on the dollar after the bank said 16 billion Swiss francs worth of the debt will be written down to zero.
As part of its rescue merger with UBS, the debt is being written down on the demands of the Swiss regulator, it was reported on Sunday, which infuriated bondholders. The merger is intended to save the company.
UBS will pay 3 billion Swiss francs (about £2.65 billion) for Credit Suisse as part of a deal that was arranged by Swiss authorities on Sunday. UBS will also accept losses totaling 4.43 billion Swiss francs.
When a proposal for Credit Suisse to borrow up to 50 billion francs (£44.3 billion) failed to satisfy investors and the bank’s clients, the Swiss authorities pushed for UBS to take over its smaller competitor.
After news of the agreement in Switzerland, central banks throughout the globe, including the Bank of England, made synchronised announcements about financial actions that would be taken the next week in order to stabilise banks. This involves providing banks with daily access to a lending facility in the event that the banks have a need to borrow US dollars, a strategy that was frequently used during the financial crisis that occurred in 2008.
On Monday morning, when the Swiss authorities revealed that they had negotiated a rescue plan for Credit Suisse, the value of the FTSE 100 fell by close to 2%.
The most important index in London had a drop of as much as 129 points immediately after the markets opened, with the largest banks in the nation leading the decline downward.
At one time, the value of Standard Chartered’s shares had dropped by more than 7%, while that of Barclays’ had dropped by just under 6%.
Earlier this morning, the markets in Asia were showing signs of weakness, with shares in Hong Kong plunging by more than 3% as the banking sector took a beating. Other markets in Asia also struggled.
That paves the way for what might be another gloomy week for markets throughout the world.
online sources: theguardian.com, uk.news.yahoo.com