By Chrysostomos Tsoufis

Since Sunday evening, everyone, analysts, stockbrokers, economists, politicians and bankers are trying, reading the fine print of the “Swiss marriage” UBS – Credit Suisseto discuss its results, and the implications it may have for the global economic system.

One of the first conclusions to be drawn is that in this takeover process, all the rules that were formulated after the financial crisis of 2008 with so much effort and after endless discussions upon discussions, they went for a walk.

Initially, some analysts believe that it shouldn’t even have happened. In simple terms, they argue that KINGDOM III, which sets the international financial standards and is a child of the 2008 crisis, does not provide for the acquisition of a bank that is in a difficult position (bail out) but rather its liquidation (bail in).

Secondly, the marriage was forced – the phrase shotgun wedding- is not lacking in any international media, the shareholders of the 2 banks were not interviewed as intended but a fait accompli was imposed on them. The damages are enormous. The Saudis who entered CreditSuisse with $1.5 billion – and for many are the moral perpetrators of the whole situation – will record losses of 80%. In the list of losers and state funds like that of Norway or even much smaller pension funds that have invested the savings of a lifetime. One could argue that they invested in a bank to avoid in terms of its management in recent years and lost. Why should UBS shareholders lose money? They had invested in a model bank, or at least one that had not occupied the financial tabloids.

It is no coincidence that legal appeals are being prepared.

Overnight, the Swiss authorities decided that holders of the AT1 bonds issued by CreditSuisse, i.e. those with the highest risk and the highest returns, are not entitled to not even 1 cent. $17 billion was wasted.

Even the ECB reacted by issuing a yellow card to Berne as it states in its announcement that the first on the list of those who will write losses in such cases are the shareholders, sending at the same time a reassuring message to the rest of Europe.

No wonder that and here legal appeals are being prepared.

The manipulations of the American supervisory and governmental authorities should be added to the compliance or non-compliance with the rules which, according to authoritative newspaper reports, have caused irritation in Europe. Small- and medium-sized regional banks are named systemic out of nowhere and the authorities guarantee all deposits regardless of amount. All this establishes for many the need for a new architecture, which everyone will respect.

Understandably, panic initially prevailed in the markets, but it quickly subsided and many stock indices turned green. The hammering was accepted by the banks as until a period has passed the risk of contagion exists. Both Christine Lagarde and inside the country Yiannis Stournaras assured that the European-Greek banking system has solid foundations.

In addition to the risk of contagion, the tendency according to experts will be for some time for banks to be tight in terms of lending, which certainly affects the prospects for growth, bringing the recession back to the fore.

Expressing the fear of recession, the price of oil fell to $72/barrel, which is a low since early December 2022.

At the same time when the stock markets are counting losses, investors are looking for safe havens. Somehow gold reached $2000/ounce after a year while cryptocurrencies are also on the rise.

In this climate, central banks will have to answer the question of continuation or not to increase interest rates. Inflation remains very high but it is precisely these sharp increases that expose the weakest links in the system causing turmoil and undermining growth. All eyes on the FED which decides tomorrow.