Credit Suisse Retrenches

Word out this week that Credit Suisse may be giving up on waiting for the securitization markets to bounce back. 

Once one of the highest flyers in the business of underwriting and trading securitized debt programs, Credit Suisse has grown weary of the string of lackluster quarters that their fixed-income banking units have posted and decided now is the time cut some of their losses.

More than a year ago, CS began to move away from the asset-backed commercial paper markets, as the benefits to the bank and its clients continued to deteriorate in the post-credit crisis era.  Now comes news this week that Credit Suisse will be exiting the commercial mortgage-backed market and downsizing several of its asset-backed banking units.

We see this as a natural result of the continued uncertain regulatory environment in the securitization markets.  Whether it be the lack of clarity surrounding the implementation of Dodd-Frank or a similar level of uncertainty for the specific implementation of Basel III guidelines, who can blame these banks for throwing their hands up.  We are fairly certain that bank management must have considered the fact that if and when the air clears, they can always get back in with a few key hires. We would find that logic hard to argue against.

Nevertheless, we would hope that this does not become a trend.  While it might be wishful thinking, perhaps some of the regulators are paying attention and this possibility will inspire them to act more decisively in drafting and approving final regulations. 

Likewise, those regulators who have begun to come around to the benefits and even the “necessity” of the return of a robust securitization marketplace are paying attention.  If they wait too long, there may be no one left to invite to the party.

About markferraris
Managing Principal Orchard Street Partners LLC

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