The fate of European lender Credit Suisse Group AG is of greater importance to the Indian banking sector than the collapse of Silicon Valley Bank, according to Jefferies India.
“Given the relevance of Credit Suisse to India’s banking sector, we see softer adjustments in assessment of counter-party risks, especially in the derivative market,” analyst Prakhar Sharma writes in a note.
As the bank “has a major presence in India’s derivatives market,” Sharma is watching for any liquidity issues or counter-party risks that may result from the fallout. Overseas banks in India have 4 per cent to 6 per cent of assets, but a large 50% share of off-balance sheet liabilities, according to the note.
Credit Suisse owns more than 200 billion rupees ($2.4 billion) of assets in India, making it the 12th largest offshore lender, according to Jefferies. Loans form 73 per cent of its total liabilities in the South Asian nation, with the majority of them of a short tenure, it added.
Sharma expects the nation’s central bank to watch for liquidity issues and counter-party exposure, and intervene as necessary. He sees institutional deposits moving more toward larger and quality banks in India.
That said, foreign banks make up only 6 per cent of banking assets, with the Swiss lender accounting for 1.5 per cent of that share, and Jefferies forecasts a “softer impact on banking in India.”
Credit Suisse announced that it was offering to buy back up to 3 billion francs ($3.23 billion) of debt securities in a move that may help to restore market confidence. Chief Executive Officer Ulrich Koerner has said the bank’s financial position is sound.