UBS to purchase Credit Suisse amid fallout from U.S. bank collapses

Swiss authorities announced on Sunday that banking giant UBS has agreed to buy Credit Suisse, a smaller rival. The landmark deal comes as major financial institutions grapple with the fallout from the sudden collapse of Silicon Valley Bank earlier this month, and work to avert a wider crisis.

“The takeover was made possible with the cooperation of the Swiss federal government, the Swiss financial market supervisory authority FINMA and the Swiss National Bank,” the Swiss National Bank said in a statement. Statement. “With the takeover of Credit Suisse by UBS, a solution has been found to safeguard financial stability and the Swiss economy in this extraordinary situation.”

At a news conference Sunday afternoon to discuss the emergency purchases, FINMA President Karin Keller-Sutter said that “Switzerland will have to take on responsibilities beyond its borders,” adding that the deal was “untenable.” In an effort to avoid “economic reparations” has been decided. Chaos in Switzerland and around the world.” Keller-Ster said the purchase “laid the foundation for greater stability in Switzerland and internationally.”

Concerns about the stability of the global banking system spread in the United States and Europe. In the wake of the failures of Silicon Valley Bank and Signature Bank, which happened less than two weeks ago and within days of each other. Their closures prompted extraordinary moves by the federal government, as well as some of the largest U.S. banks, to provide financial aid to institutions that had become at risk in the turmoil.

Credit Suisse received. About $54 billion As part of these negotiations, Swiss National Bank last week, while a consortium of 11 major US banks, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, secured $30 billion in funding for First Republic Bank. Agreed to provide. The four banks each agreed to contribute $5 billion, while Goldman Sachs and Morgan Stanley each agreed to contribute $2.5 billion, and BNY Mellon, PNC Bank, State Street, Trust and U.S. S Bank each agreed to contribute $1 billion.

The emergency funding pledges on Thursday briefly halted the ongoing slide in the stocks of both banks, which resumed the next day. On Friday, Credit Suisse’s share price fell 7% to end the day at $2.01.

UK Credit Suisse
A woman walks past the Credit Suisse bank headquarters in London on Thursday, March 16, 2023.

Frank Augustine / AP

Shares in Credit Suisse, Switzerland’s second-largest commercial bank, fell 30% on the SIX stock exchange after its largest shareholder said Will not add more money. The bank faced problems before the failures of US banks in the institution sparked fear and a lack of confidence among big investors, and it announced plans to borrow up to 50 billion francs from the national bank on Thursday.

“This additional liquidity will support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a bank that is simpler and more focused on client needs,” Credit Suisse said in a statement at the time.

A sharp drop in its share price a day earlier marked a record low for Credit Suisse, after the Saudi National Bank told news agencies that it would not inject additional funds into the institution because it failed to comply with regulations. Try to avoid those that will apply with it. A stake of more than 10 percent in the Swiss lender. The upheaval triggered a trading freeze in Credit Suisse shares on the Swiss market and significantly affected shares of other major European banks, with some share prices falling by double digits.

Despite the Swiss National Bank’s move to increase financing in Credit Suisse, Capital Economics Analyst He said concerns remained about the health of the institution, especially since it had not been profitable in two years.

Andrew Cunningham, chief Europe economist at Capital Economics, said in an investor note on Friday that, while Credit Suisse plans to revive the business over three years, “it is uncertain whether the market will allow it that long.” “

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