Credit Suisse shows well capitalised banks can lose trust, Japan official says

CREDIT Suisse Group’s dramatic rescue is a lesson that even well-capitalised banks can lose the trust of the market, according to a senior Japanese regulatory official.

“Credit Suisse had such a high capital adequacy ratio and yet, the market gave up on it judging it had a weak business model,” Tomoko Amaya, the Financial Services Agency’s (FSA) vice-minister for international affairs, said in an interview. It is “an important lesson” that having a lot of capital isn’t enough to reassure the market, she said.

The Swiss lender succumbed to a crisis of confidence about a month ago, prompting the country’s authorities to step in to broker its sale to larger rival UBS Group. Earlier, troubles at Silicon Valley Bank and its subsequent collapse had driven investor attention to the heavy investment in US bonds by Japan’s lenders, putting their shares under pressure.

Amaya said that the FSA, Japan’s financial regulator, is following up on how brokerages sold 140 billion yen (S$1.4 billion) worth of risky debt issued by Credit Suisse known as Additional Tier 1 (AT1) notes.

“We have already identified the sales by Japanese brokerage firms to Japanese investors including retail investors,” she said earlier on Monday (Apr 24) in an interview with Bloomberg Television. “So we are following up on how these securities firms and brokerage firms were dealing with the customers, how they sold the AT1 bonds,” she said. BLOOMBERG