Tag: Credit Suisse

Can data science capture key insights in news articles?

Itua Etiobhio, Riyad Khan and Steve Blaxland

The volume of information available to supervisors from public sources has grown enormously over the past few years, including unstructured text data from traditional news outlets, news aggregators, and social media. This presents an opportunity to leverage the power of data science techniques to gain valuable insights. By utilising sophisticated analytical tools, can supervisors identify hidden patterns, detect emerging events and gauge public sentiment to better understand risks to the safety and soundness of banks and insurance firms? This article explores how data science could support central bank supervisors to discover significant events, capture public trends and ultimately enable more effective supervision.

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Convertible or not: making sense of stresses in AT1 bonds market

Mahmoud Fatouh and Ioana Neamțu

Similar to the Deutsche Bank’s episode in 2016 and the Covid stress in 2020, AT1 spreads over subordinated debt rose rapidly and sharply following the Credit Swiss rescue deal. Beyond these three cases, AT1 spreads have been stable. In this post, we focus on conversion risk of AT1 bonds (also known as contingent convertible, CoCo, bonds) to explain the sharp rise in AT1 spreads in these three cases. Conversion risk is the main additional risk of AT1 bonds, compared to subordinated debt. It arises from the potential wealth transfer from AT1 bondholders to existing shareholders when AT1 conversion is triggered, conditional on the solvency of the issuer. We show that, in normal times, investors believe conversion risk is very low, but major events can change this significantly, largely due to higher uncertainty.

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