24th March 2023 – (Hong Kong) On Friday, Standard Chartered Chief Executive Bill Winters stated that the Credit Suisse AG’s $17 billion Additional Tier 1 bonds wipeout had “profound” implications for global bank regulations. Speaking at a financial forum in Hong Kong, he also criticised the U.S. Federal Reserve’s move to guarantee non-insured deposits as a “moral hazard”.
The decision by Swiss regulators to wipe out Credit Suisse’s AT1 bonds with a notional value of $17 billion as part of the deal for UBS Group AG to take over Credit Suisse was a surprise to global credit markets and angered many holders. Winters believes this decision will have a significant impact on the regulation and management of banks.
In addition to the Credit Suisse takeover, two U.S. banks collapsed in the past two weeks, and America’s biggest lenders agreed to deposit $30 billion in beleaguered First Republic Bank. Winters noted that there are still “non-viable business models remaining, at least in the U.S.”, with other banks having similar deposit concentrations.
Winters also criticized the move to guarantee non Federal Deposit Insurance Corporation-insured deposits, calling it the “most wonderful example of moral hazard that we’ve come across in quite a while.”
Following the banking crisis, Standard Chartered’s liquidity coverage ratio (LCR), which measures how much cash-like assets the bank has, has increased significantly. Winters stated that the bank’s LCR was 147% before the bank failures and is substantially higher now, though he did not disclose the current level. Winters emphasised that the issue is not whether regulators have confidence in the bank’s solvency, but whether the market has confidence in its liquidity.
