TUESDAY, 04/04/2023 - Scope Ratings GmbH

The Wide Angle – Lessons from the banking turmoil: AT1 vs equity; resolution framework vs reality

The prophets of doom are wrong. Again. The forced merger of CS into UBS has not triggered another European banking crisis. The market’s attempts to deepen the panic by targeting Deutsche Bank to instil alarm about more European banks have gone nowhere.

But this does not mean the post-GFC European banking sector is not vulnerable. The recent turmoil illustrates, first the industry’s structural fragility; second, that post-GFC re-regulation is not hard protection against all threats.

In his latest The Wide Angle, Sam Theodore addresses the thorny topic of AT1 vs. equity (not as straightforward as it looks); and the resolution process (what the framework says vs. reality).

Read The Wide Angle here.