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He also believes that the failure of CS could have been prevented with significantly greater equity. In an interview with “Handelzeitung” online on Tuesday, Hellwig keeps coming up with the “legend” that in such a “bank run” in CS it’s “just a liquidity issue”. This may be true on the surface as well.
It is unrealistic for an escape to occur suddenly and for no deeper reason. “My comment about the collapse of CS was that depositors were worried that the bank was on its way to bankruptcy,” said the German.
The behavior of financial market supervisor Finma or Federal Councilor Karin Keller-Sutter was also “vague and inconsistent”: At the time, they said that restructuring and settlement procedures for bankrupt banks could not be used because it was a loss. gave confidence and a “terrible liquidity problem”.
Hellwig replied, “But if this was purely a liquidity issue, what was the basis for the total cancellation of AT1 bonds?” said. And why do you need a government guarantee of 9 billion for losses over 5 billion? “Creditors and taxpayers’ loss-sharing was only necessary assuming a solvency issue.”
According to the bank expert, the patient has a great understanding of the solution to the forced takeover of the big bank by UBS, but not because of the fact that the shareholders were spared. In the meantime, he wonders why the federal government has only incurred staggering losses and not “amazing profits.”
According to Hellwig, the restructuring or liquidation of an internationally active bank such as CS had to be assumed not to operate according to the “too big to fail” regulation. For example, plans ensure that a single organization is responsible for the operation. “But it’s an illusion that it works politically.” The US will never allow a European authority to be responsible for the restructuring and liquidation of a US subsidiary.
According to the economist, big banks have too many implied government guarantees that eliminate liability. These can only be eliminated by significantly stricter equity regulations: “The relevant ratio should be equity in relation to total assets – 20 to 30 percent is appropriate.” If it’s even more, start “gambling” at the bank. For comparison: UBS reported a leverage of 4.4 percent at the end of 2022. (SDA)
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
