CEO's Corner®-By K.L.P Entertainment™-"March 23rd Edition"

CEO’S CORNER A Banking Crisis Continues?

The Investment Bank at Credit Suisse Is Slowly Dying

As part of its acquisition of the struggling Swiss lender, UBS is debating whether and how to terminate a deal that would have preserved the majority of its rival's investment bank. What would happen to the struggling company's investment bank was a major concern when UBS over the weekend decided to purchase Credit Suisse at a fire sale price. Credit Suisse had launched an ambitious plan to spin out the division

the direction of seasoned dealmaker Michael Klein, as part of its now-failed turnaround effort.

Yet, it appears that the investment bank will be essentially disbanded since UBS makes it apparent that it is only interested in certain parts of the institution. Meanwhile, the Swiss government is attempting to prevent some promised payments to Credit Suisse's bankers. What was once a premier corporate advisors now looks like an ice cube that is melting.

Presented By Kennedy Lucas Publishings LC

The Klein-led spinout is likely to be abandoned by UBS, eliminating the best chance of retaining signi the investment bank. The plans called for Credit Suisse to buy Klein's consulting boutique, combine it with a different subsidiary, and eventually spin it off as First Boston. (Klein, who served on the board of Credit Suisse, would have earned $175 million for his company and an additional $10 million for advice on Credit Suisse's strategy; the terms were apparently viewed as being too advantageous by some at UBS.)

UBS is deciding whether to DealBook has information regarding how that deal would be terminated. From the takeover announcement, it had been obvious that First Boston would be unable to rely on cash from Credit Suisse to assist finance equity and debt underwriting due to the UBS transaction. In order to strengthen its own advising activities and supplement its main wealth management business, UBS has expressed interest in keeping

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investment banking

have fewer incentives

their The likelihood of UBS is, at best, hazy.

Furthermore, the Swiss government announced would revoke deferred bonuses given to Credit Suisse staff prior to 2022. (The bank may still be able to pay cash incentives for the prior year.) For Credit Suisse employees, who have already seen the value of their employer's stock and bonuses in the form of various securities connected to the bank's performance all but wiped out by the UBS acquisition, this only makes things worse.

NEWS STOCK MONEY BUSINESS

-DIAM NOBIS

This might make it more difficult for Credit Suisse to do business as usual, especially if worried bankers call recruiting agencies to look for work elsewhere.

Further Credit Suisse news includes the organization of an investing

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More news regarding the banking crisis: Congress is likely to interview Fed Chair Jay Powell about why regulators failed to notice warning signs at midsize lenders. While the government considers additional backstops to entice potential rescuers of the company, First Republic has recruited Lazard to help review its strategic options. At its meeting, which ends this afternoon, the Federal Reserve must make a challenging choice: Do they hike interest rates in reaction to alarming recent inflation numbers, even at the risk of hurting banks even more? Or should officials hold off on raising interest rates and take the chance that inflation will continue to be high?

Another illustration of the wide range of issues that economic harm caused by banking crises. In today's email, I'll first discuss the Fed's difficult decision before examining one of the takeaways from the present financial crisis. Most all, the instability serves as a stark reminder of the significant costs associated with the country's historically inadequate bank regulation. There are good reasons for the Fed to keep raising interest rates and also good reasons for it to stop. This presents a challenge for the Fed. On the one hand, recent economic indicators indicate that inflation may not be declining as quickly as analysts had anticipated. Forecasters anticipate that the average consumer price will stay over 3 percent and is currently about 6% higher

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“Write quickly and you will never

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sale price. Credit Suisse had launched an ambitious plan to spin out the division months before to the instability that ultimately brought down the company, under the and raises concerns that inflation may continue to be high for some time. They will subsequently ask their bosses for salary raises, which may set off a chain reaction where businesses boost their prices to cover the raises and inflation rises even further. These dangers are increased by the current job market's tightness and low unemployment rate (nearest level since the 1960s). The economy still appears to be expanding faster than is healthy.

-DIAM NOBIS

Kennedy Lucas & Associates

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The Investment Bank at Credit Suisse Is Slowly Dying

As part of its acquisition of the struggling Swiss lender, UBS is debating whether and how to terminate a deal that would have preserved the majority of its rival's investment bank. What would happen to the struggling company's investment bank was a major concern when UBS over the weekend decided to purchase Credit Suisse at a fi Suisse had launched an ambitious plan to spin out the division months before to the instability that ultimately brought down the company, under the

A traditional bank run happened because people didn't have enough money to get their deposits back. Others are still in danger, and it caused the failure of Silicon Valley Bank and Signature Bank.

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-DIAM

NOBIS

The balance sheets of further banks could be harmed, and there could be new bank runs, if Fed authorities keep raising their target rate. A half-point gain is therefore no longer as plausible. Paul Krugman of The Times is one economist who has advised the Fed to hold off on any more rises for the time being. Several observers anticipate that the Fed will make a concession and increase the rate by a quarter point; Jason

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the Dodd-Frank Act, lawmakers strengthened the laws following the financial crisis of 2007–2009. Nevertheless, in 2018, Congress and the Trump administration relaxed regulations for smaller banks, which benefited companies like Silicon Valley Bank and Signature Bank. Despite how complex finance might seem, the fundamental ideas guiding bank regulation are simple. Because banks could obtain special benefits from taxpayers during a crisis, they need more monitoring from the government. This examination places restrictions on banks' tolerance for risk and mandates that they maintain sufficient cash reserves to weather the majority of expected catastrophes. Admati said, "You make sure they have enough to pay."

-DIAM NOBIS

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