Regulators respond to FINMA action

Following the announcement from the Swiss authorities of a range of actions to support financial stability in the wake of the concerns over Credit Suisse, FCA has indicated that the UK regulators are minded to approve such of the actions that fall within their regulatory remit. The key relevant decision is FINMA’s approval for UBS to take over Credit Suisse, with the Swiss National Bank providing liquidity to support the takeover. The concern was that Credit Suisse would become illquid even if still technically solvent.

The BoE confirmed that the UK banking system is well capitalised and funded and remains safe and sound. Separately, while welcoming the actions of the Swiss authorities, it noted that the UK’s bank resolution framework has a clear statutory order in which shareholders and creditors would bear losses in a resolution or insolvency scenario – and that, in the case of SVB UK, all of its AT1 and T2 instruments were written down in full and its entire equity transferred for £1. It noted that AT1 instruments rank behind T2 but ahead of CET1, and holders of instruments would be exposed in an institution’s insolvency in order of those positions in the heirarchy.