More than 70 percent of local banks have stopped selling bonds or structure notes issued by Credit Suisse Group AG, while the remainder has either avoided recommending the Swiss company’s products or only make them available to professional investors, the Financial Supervisory Commission (FSC) said on Thursday, citing a recent survey.
Battered by a series of scandals, rumors of financial trouble and plunging shares, Credit Suisse has been at the center of market turmoil in recent weeks. Chief executive officer Ulrich Koerner early this month acknowledged that the bank was facing a “critical moment” in its latest restructuring plans.
Credit Suisse’s credit default swaps (CDS), the cost of insuring the bank’s bonds against default, climbed above 300 basis points last week amid concerns about the Swiss lender’s financial health.
Photo: AFP
“Some clients are cashing out their investment in Credit Suisse and we do not see any liquidity issue for the Swiss company,” Banking Bureau Deputy Director-General Phil Tong (童政彰) told an online news conference.
Credit Suisse’s products are available to retail and professional investors, with retail investors buying the most, Tong said.
If clients suffer investment losses when they redeem their Credit Suisse holdings, local banks would usually offer some compensation such as a discount in handling fees, Tong said.
The commission has asked banks to restrict sales of Credit Suisse’s financial products to 20 percent of their total sales, Tong said.
The commission did not disclose local banks’ combined exposure to Credit Suisse.
Local life insurers have a combined exposure of NT$110.2 billion (US$3.46 billion) to Credit Suisse, mainly in the form of bond holdings, the commission said.
Insurers do not need to recognize credit losses since those bonds remain investment-grade rated and Credit Suisse still pays yields normally, it said.
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