What Do the Swiss Banks Seem to See in India and How Will the Takeover of Credit Suisse Affect Their Existence?
The proposed acquisition of Credit Suisse by UBS is expected to witness the consolidation of the two banks'Indianoperations. While UBS and Credit Suisse are in India in investment banking and wealth management, they have a bank license and have only one branch in Mumbai.
In June 2013, UBS received the Bank's Banking Licensing from RBI in 2009 and shut down its banking business in India, and returned the Licensing to RBI. The decision to leave Indian banks may be partly linked to a broader global movement, driven by stricter capital requirements introduced as part of Basel III standards. These standards have forced some foreign banks to restrict their activities in markets such as India and to reduce investments in Indian companies.
UBS was one of the first to consider a complete withdrawal from India's banking business. UBS Securities maintains a separate investment banking license issued by the Indian Securities and Exchange Commission. UBS has been investigated in India over the money laundering allegations involving controversial businessman Hasan Ali Khan. UBS decided at the end of 2010 to grow its commercial banking business and began actively lending to large Indian companies. In 2011 and 2012, the lenders also aggressively entered the high-performance loan business. However, these companies did not generate sufficient profits and therefore decided to leave the two businesses. According to data provided by RBI's Banking Profile Report, UBS had outstanding repurchases of $6.2 billion at the end of March 2012. In October 2012, UBS decided to shut down its fixed-income business in India as part of a global decision to leave the fixed-income market.
Credit Suisse and the Derivatives Market in Mumbai: A Review
In January 2013, Credit Suisse received a license from the Reserve Bank of India to establish a bank branch in Mumbai. It has over Rs 20,000 crore in assets (12th among foreign banks), a presence in the derivatives market and funded 60% of assets from borrowings, of which 96% is up to two months, research firm Jefferies said.
“Still, it is small for the banking sector with 0.1% share of assets. We watch out for liquidity issues and any rub-off on counter-party risk assessment (especially in derivatives) and the deposit market may move towards larger, quality banks,” Jefferies said.
Credit Suisse is present as a branch and has a 1.5% share among foreign banks’ assets and 0.1% in sector assets. Jefferies said, “Credit Suisse has only one branch in India and has a total asset base of over Rs 20,000 crore that is 12th largest among foreign banks with 1.5% share in foreign banks’ assets and 0.1% in sector assets. 70% of assets are in G-Secs (short term) and have 0 NPLs.”
Borrowings in India form 73% of total liabilities and 96% of borrowings have a tenure of up to 2 months. The deposit base of Credit Suisse is smaller at Rs 2,800 crore, forming 20% of total liabilities and 70% are from subsidiaries.
UBS Securities India Pvt Ltd.: A Securities and Exchange Board of India Registered Stock Broker
UBS Securities India Pvt Ltd is a registered stock broker of the Securities and Exchange Board of India (SEBI) and a member of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). UBS offers expert advice, innovative solutions,execution, and extensive access to India's international capital marketsto corporate, institutional, wealth management clients. India is one of the UBS technology centres with a large work force. Credit Suisse Securities (India) PvtLtd. was established in December 1996 and is an auxiliary company to financial mediation, with the exception of insurance and pension funds. It already provides wealth management, investment banking, and asset management in India to corporate and institutional clients.
