The crisis at the Swiss banking major Credit Suisse Group is more relevant to India's financial system than the Silicon Valley Bank (SVB) crisis, according to investment banking and financial services company Jefferies.
“Credit Suisse is more relevant to the Indian financial system than Silicon Valley Bank,” Jefferies said in a note.
The note highlighted that the Reserve Bank of India (RBI) will intervene if necessary and will keep a close watch on liquidity issues and counterparty exposure.
“We expect RBI to keep a close watch on liquidity issues, and counter-party exposures, and intervene as necessary. This may also lead to institutional deposits moving more towards larger and quality banks,” the financial service provider said.
The bank has a branch in Mumbai. They have an asset base of roughly Rs 20,000 crore and around 70 per cent of its assets are held in the form of government securities. Also, its off- balance sheet items are seven times its total assets.
The Jefferies note read, "Alike foreign banks, their off-balance sheet is seven times the total assets, and they are the 14th largest foreign bank in the system.”
Foreign banks have a relatively smaller presence in India. They have 6 per cent share in total assets, 4 per cent share in loans, and 5 per cent in deposits in the whole Indian banking system, the Jefferies note said.
It is worth noting that despite a smaller share in the banking system overall, foreign banks are more active in the derivative markets, foreign exchange, and interest rates. They control 50 per cent of the market share in these areas as per the note.
On Wednesday shares of the Swiss investment bank Credit Suisse crashed after its main shareholder Saudi National Bank said it would not invest any more money in the bank. Furthermore, its annual report cited 'material weaknesses in internal control.
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