Credit Suisse Group AG, Silicon Valley Bank Financial Group (SVB), Signature Bank (SBNY) and BNY Mellon Investment Management funds
The issue that began with one US regional bank on 10 March 2023, has caused worldwide volatility in the financials sector. The confidence crisis has since spread to Europe.
On 19 March UBS Group AG bought Credit Suisse AG Group for more than US$3bn in what was called an “emergency” bailout. Shareholder approval of the deal was not needed as the Swiss government agreed to change the law in order to pass the deal quickly.1 The Swiss National Bank and FINMA, an independent supervisor of the Swiss financial market, noted the extraordinary government support will trigger a complete write-down of the nominal value of all AT1 shares of Credit Suisse. AT1s, also known as contingent convertibles (or Cocos), is a type of bond issued by a bank which typically features a higher premium as it can be written down to zero in “extraordinary” circumstances.
According to FINMA, the takeover will require higher capital buffers for the merged bank. FINMA will grant appropriate transitional periods for these to be built up.2
How our different pooled investments are impacted by volatility depends on many different factors. This includes direct exposure to the entities at the heart of the matter – like Silicon Valley Bank (SVB), Signature Bank (SBNY) and now, Credit Suisse Group AG. It also extends to bond holdings – particularly AT1s – across our fund range. (Please see Table 1)
None of the funds in BNY MIF or BNY MGF had any equity holdings in Credit Suisse as of 16 March 2023.
BNY MIF and BNY MGF funds had minimal direct exposure to SVB and SBNY (please see Table 2) when these events unfolded. Only four of the funds held small positions. Likewise, exposure to other US banks was limited. Within these funds, the vast majority of holdings are in large US financial institutions, not regional or community banks.
We will endeavour to keep you posted on the event itself, its ramifications and impact on the financial markets. Additionally, we will look to post regular updates to these tables highlighting direct exposure within our funds. Please reach out to your regular BNY Mellon contact if you have any further questions.
Important. The fund exposures in the tables below have been calculated based on market data provided by third-party pricing vendors as of the date shown. The data set out in the following tables is unaudited and does not represent official books and records of the funds and is subject to change.
The below tables are based on equity and/or debt direct exposures. Counterparty exposure from derivatives is not included in these percentage weightings nor is the indirect, ie derivatives exposures.
The data below is provided for information purposes only. The user relies on this data at its or their own risk and neither BNY Mellon nor any other party makes any representations or express or implied warranties (which are expressly disclaimed) nor shall they incur any liability for any errors or omissions in the data. The above shall not exclude or limit any liability that may not by applicable law be excluded or limited. This data does not constitute an advertisement, an offer to sell or a solicitation of an offer to buy shares or units in any fund. The information provided is not intended to be, and should not be treated as investment advice, nor a recommendation about the suitability of any products for the circumstances of any particular investor.
Table 1: Credit Suisse AT1 holdings as at 16 March 2023 across BNY Mellon Investment Funds (BNY MIF – our UK domiciled range) and BNY Global Funds (BNY MGF – our Ireland-domiciled range)
% of NAV
BNY Mellon Absolute Return Bond Fund
BNY Mellon Global High Yield Bond Fund
BNY Mellon Global Real Return Fund (EUR)
BNY Mellon Global Real Return Fund (GBP)
BNY Mellon Global Real Return Fund (USD)
BNY Mellon Real Return Fund
*Please note: The managers of the BNY Mellon Absolute Return Bond Fund, Insight Investment, sold out of the CS AT1 holding prior to 19 March 2023.
Table 2: As at 9 March 2023, holdings in Silicon Valley Bank Financial Group (which banking regulators closed on 10 March 2023) and Signature Bank (which was closed by banking regulators on 12 March).
Silicon Valley Bank Financial Group
BNY Mellon Blockchain Innovation Fund *
BNY Mellon Dynamic U.S. Equity Fund
BNY Mellon Dynamic U.S. Equity Fund
BNY Mellon Efficient Global IG Corporate Beta Fund
* As of the close of business 10 March 2023, holdings of Signature in BNY Mellon Blockchain Innovation Fund represented 0.0% of the fund. As of 28 March 2023, the BNY Mellon Dynamic US Equity Fund had sold its holding in SVB.
Please note – as of 13 March, SVB and SBNY (equities) were valued at zero.
Source: BNY Mellon Investment Management.