UK banking system 'safe and well-capitalised', says UK PM after credit suisse rescue

Since the collapse of Sillicon Valley Bank, hundreds of banks are facing the risk of failure due to mounting interest rates and a high proportion of uninsured deposits. Amid all the ongoing chaos, the UK government on Monday assured that the country's banking system is 'safe and well-capitalised'.

This statement came after regulators agreed to a rescue deal for Credit Suisse to prevent fears about the bank's failure. The bank was bought by USB in an agreement that was backed by the Swiss government on Sunday after regulators somehow managed to reach an agreement. However, the actions taken by regulators on Sunday did not stop the shares from falling in Europe.

Investors consider legal action over Credit Suisse agreement

On Monday, the Prime Minister’s official spokesman said that Rishi Sunak is in touch with the Swiss president and has been regularly updated on the situation by the Treasury and the Bank of England. "Obviously it is good that a resolution has been secured," the spokesman said, adding, "As the Bank of England has said, we believe the UK banking system remains safe and well-capitalised. We have a strong regulatory system, and we have taken a number of steps over the past 15 years, together with the Bank of England, to strengthen that system."

Meanwhile, all those investors who hold shares or bonds in Credit Suisse are considering taking legal action over the bank’s rescue by UBS. Discussions are on about taking industrial action against the bank's rescue by UBS, said Global litigation firm Quinn Emanuel Urquhart & Sullivan who added saying that some investors who hold Credit Suisse’s AT1 bonds, the risky securities which are being surprisingly wiped out under the UBS deal, are also considering legal action.

According to a report published by The Guardian, the team will examine Switzerland’s decision to make Credit Suisse’s AT1, or CoCo, debt worthless, while shareholders will receive $3.2 billion from UBS.

"That team is already in discussions with a number of holders of Credit Suisse’s AT1 capital instruments, representing a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse, about the possible legal actions that may be available to them in light of the announcement of the merger between UBS and Credit Suisse," the firm said.

Notably, Deutsche Bank and UBS' shares were trading at 1.8% and 3.7% lower, respectively. Meanwhile, British banks also remained in the red, after last week they saw their sharpest falls in more than a year. However, experts have now predicted that a repeat of the 2008 financial crisis can return when the failure of a number of big banks sparks a global recession. Meanwhile, the Swiss National Bank stated the best way to restore the confidence of financial markets and manage risks to the economy was the rescue deal for Credit Suisse.

Image: AP