Credit Suisse Saw Only Moderate US Money Fund Outflows

Money fund flows are driven by various factors, including pricing, and can react to headline risk either by reducing exposures or by shortening maturities. Banks do not rely on these short-term funds and in most instances place deposits from the money funds with the Federal Reserve.

US prime money fund allocations to Credit Suisse fell 8% in May compared to relatively stable total prime fund assets, according to data from Crane. The monthly decline is higher than the average monthly variance of 4.8% for Credit Suisse’s money fund exposures over the previous six months. But the exposures are still slightly above the end-2013 level, so the overall fall is not material. The bank was still one of the top 15 held names, comprising $39bn, or 2.6% of money fund assets.

There were stark contrasts at the fund manager level with some counterparties reducing allocations and others raising exposures to Credit Suisse. The largest decrease for a fund manager was approximately USD1bn, or 23% of the fund manager’s exposure to the bank. Further downward or upward adjustments are possible as the settlement is digested, but the impact on overall money fund allocations is likely to be limited. As we have said previously, we do not believe the fine and guilty plea from Credit Suisse’s settlement on May 19 will cause significant damage to its franchise.

Money fund exposures to BNP Paribas, which is involved in an ongoing investigation on US sanctions breaches, increased slightly in May to 2.7% of assets, up 0.1pp from end-April. Allocations to the bank were USD1bn or 2.8% higher than April, even though total money fund assets were broadly flat. There was, however, a wide range of allocation changes among the fund manager mix, like at Credit Suisse.

Bank of America, which is in discussions with the US Department of Justice on various mortgage related issues, also saw an increase in money fund allocations. Money fund exposures to BAC increased by USD1.9bn or 6.7% during May, reaching 2.0% of total money fund assets.