How the Credit Suisse Crisis Shook the World

Welcome to today’s Morning Brief, where we’re looking at the global impact of the Credit Suisse crisis, the Japanese prime minister’s surprise visit to Ukraine, and why the United States is downplaying a stopover from Taiwan’s president.

Welcome to today’s Morning Brief, where we’re looking at the global impact of the Credit Suisse crisis, the Japanese prime minister’s surprise visit to Ukraine, and why the United States is downplaying a stopover from Taiwan’s president.

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How the Credit Suisse Crisis Shook the World

Credit Suisse may have been saved by a last-minute takeover by UBS Group, but the destabilizing crisis’s aftershocks were nevertheless felt around the world.

Credit Suisse was known as “global systemically important bank,” meaning its collapse would have had global impact. Swiss Finance Minister Karin Keller-Sutter said that she had been in close contact with U.S. Treasury Secretary Janet Yellen and U.K. Finance Minister Jeremy Hunt. The United States and United Kingdom have large Credit Suisse subsidiaries, both of which employ thousands. Keller-Sutter insisted “this is no bailout” and that “bankruptcy would have been the highest risk because the cost to the Swiss economy would have been huge.”

The deal was evidently not enough to quell concerns about systemic risks to global markets. And the takeover, which wiped out $17 billion in Credit Suisse bonds, led to shock and panic in Asia. Some retail investors in Asia panicked because they were exposed to AT1s—also known as contingent convertibles or “CoCos”—a risky debt class intended to absorb shocks during institutional crises through conversion to equity or being written off entirely. Swiss regulators confirmed that the value of Credit Suisse’s AT1s would be reduced to zero due to a clause allowing a full write-down in case of insolvency, wiping out bondholders’ investments while stockholders did not lose everything. On Tuesday, Asian AT1s were still trading lower than they had been last week.

Meanwhile, Saudi Arabia’s investment in the bank, which was meant to be its grand debut into global banking, was almost entirely wiped out, reported the Wall Street Journal, which also said that billions in Qatari investments disappeared as Credit Suisse melted down and investors and depositors pulled their money out.

What We’re Following Today 

The Japanese prime minister makes a surprise visit to Kyiv. Japanese Prime Minister Fumio Kishida, fresh off a visit with Prime Minister Narendra Modi in India and one day after Chinese leader Xi Jinping met with Russian President Vladimir Putin, made a surprise trip to Ukraine for a visit with Ukrainian President Volodymyr Zelensky. He also traveled to Bucha, the town that has, for many, become identified with Russian atrocities. The trip is the first time since World War II that a Japanese prime minister visited a country or region experiencing ongoing fighting. Japan’s ministry of foreign affairs said the visit was at Zelensky’s invitation.

U.S. downplays expected Taiwanese president visit. Taiwanese President Tsai Ing-wen is expected to make an unofficial stopover in the United States on her way to Latin America in the near future, and U.S. officials have emphasized that this is in line with precedent and should not be used by China as pretext for aggression.

“There’s no reason for China to overreact. Heck, there’s no reason for China to react,” said John Kirby, White House National Security Council spokesperson. Reuters, however, reported that Chinese foreign ministry spokesperson Wang Wenbin said, “We again warn the Taiwan authorities that there is no way out for Taiwan independence, and any illusions about attempts to collude with external forces to seek independence and provocation is doomed to fail.”

Keep an Eye On

Drought caused 43,000 “excess deaths” in Somalia last year. A new report released by Somalia’s government estimates 43,000 “excess deaths” in the country last year, half of which are believed to be children under the age of five. “We continue to be concerned about the level and scale of the public health impact of this deepening and protracted food crisis in Somalia,” said Somalia’s health minister, Ali Hadji Adam Abubakar. As many as 34,000 deaths have been forecast for the first half of 2023.

Boris Johnson to admit he misled Parliament. Former U.K. Prime Minister Boris Johnson is reportedly planning to say that while he misled the House of Commons regarding “Partygate,” a series of Downing Street parties held while the country was in lockdown because of the pandemic, he did so unintentionally and was acting in “good faith.”

Ahead of a hearing on Wednesday, Johnson’s 52-page written evidence was released. In it, he wrote, “I accept that the House of Commons was misled by my statements that the rules and guidance had been followed completely at No 10. But when the statements were made, they were made in good faith and on the basis of what I honestly knew and believed at the time.” Johnson risks being suspended from parliament if the cross-party privileges committee decides he “recklessly” misled parliament.

If China Arms Russia, the U.S. Should Kill China’s Aircraft Industry by Richard Aboulafia

Can Russia Get Used to Being China’s Little Brother? by Philipp Ivanov

A Coup Would Put Pakistan Squarely in China’s Bloc by Azeem Ibrahim

Gone as gold. A stash of gold worth £4 million (approximately $5 million) intercepted at London’s Heathrow Airport in June 2019 has finally been reclaimed. The British National Crime Agency, working with authorities in the Cayman Islands, established that South American drug cartels had used false paperwork to conceal that the gold—some of it shaped like hearts—was from Venezuela. The NCA got a civil recovery order for roughly 80 percent of the gold. The other 20 percent will go back to companies that have a financial interest.

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