Key Points of Credit Suisse Crisis Risk to India:
- Jefferies warns that India is more vulnerable to the fate of Credit Suisse than the collapse of Silicon Valley Bank.
- Credit Suisse is the 12th largest offshore lender in India with over Rs 200 billion worth of assets in the country.
- 73% of Credit Suisse’s total liabilities in India are in the form of loans, mostly short-term ones, making it a risky proposition.
- Credit Suisse has a significant presence in India’s derivatives market, making it a potential source of counterparty assessment risks and liquidity issues.
- The Reserve Bank of India is expected to closely monitor the situation and intervene as needed.
- Foreign banks account for only 6% of banking assets in India, with Credit Suisse representing just 1.5% of this.
- Indian banks have a robust asset liability management position, with only about 25% of their deposits invested in securities, providing a cushion for the market in the event of an accident.
- The collapse of Silicon Valley Bank has trapped the working capital of a majority of YCombinator-backed startups, but Indian banks have a solid asset liability management position, making it easier for the market to bounce back from accidents such as this.
Details of Credit Suisse Crisis Risk to India:
Jefferies Warns Credit Suisse Crisis Poses Greater Risk to India than Silicon Valley Bank’s Collapse
According to brokerage firm Jefferies, India is more vulnerable to the fate of Credit Suisse, a Swiss lender, than it is to the collapse of US-based Silicon Valley Bank. With over Rs 200 billion worth of assets in India, Credit Suisse is the 12th largest offshore lender. However, 73% of its total liabilities in India are in the form of loans, mostly short-term ones, making it a risky proposition.
As of March 16, Credit Suisse announced that it was borrowing up to $54 billion from the Swiss central bank to resuscitate liquidity amid fears of a broader bank deposit crisis. While Swiss regulators have assured investors that Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks,” the bank’s global customer deposit base and total assets shrank 37% and 24%, respectively, during the December quarter of the financial year 2022-23.
Jefferies highlights that Credit Suisse has a significant presence in India’s derivatives market, making it a potential source of counterparty assessment risks and liquidity issues. As a result, Jefferies expects the Reserve Bank of India to closely monitor the situation and intervene as needed.
Despite the potential risks posed by Credit Suisse, Jefferies predicts that foreign banks account for only 6% of banking assets, with Credit Suisse representing just 1.5% of this. This is why Jefferies believes that the impact on Indian banking will be softer. Furthermore, Indian banks have a robust asset liability management position, with only about 25% of their deposits invested in securities, providing a cushion for the market in the event of an accident.
It’s worth noting that while the collapse of Silicon Valley Bank has trapped the working capital of a majority of YCombinator-backed startups, foreign banks only account for 6% of Indian banking assets. Additionally, Indian banks have a solid asset liability management position, making it easier for the market to bounce back from accidents such as the collapse of SVB.
About Credit Suisse:
Credit Suisse, which was established and has its roots in Switzerland, is a worldwide investment bank and financial services company.
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