Taiwan’s financial regulator says Taiwanese investment banks have largely avoided losses in the Credit Suisse meltdown. The Financial Supervisory Commission reported that the “additional tier 1,” or “AT1” bonds, issued by Credit Suisse have always had very low credit ratings. It says no major banks in Taiwan are exposed to big setbacks.
The Swiss National Bank has announced that the country’s largest bank, UBS, is buying Credit Suisse for 3 billion Swiss francs (US$3.25 billion). But the deal includes writing off all of the bank’s US$17 billion worth of AT1 bonds, meaning institutions holding them will be left empty handed. Many now fear the effect of the write off on bond holders in Taiwan.
Cathay Life Insurance is Taiwan’s largest holder of Credit Suisse bonds, possessing NT$34 billion (US$1.1 billion) in assets. But Cathay Holdings, the insurer's parent company, says none of these assets are AT1 bonds.
Economist Wang Li-rong (王儷容) says she is watching the buyout closely and worries that the impact of Credit Suisse’s bond wipeout could amount to a financial crisis. In the meantime, gold prices have rallied to the highest point in 11 months as bond yields retreat, showing that investors are looking for a safe haven.