According to three people familiar with the situation, Switzerland is preparing to use emergency measures to speed up UBS’ takeover of Credit Suisse, as banks and their regulators rush to seal a merger deal. Enter before the market opens on Monday.
Under Swiss regulation, UBS typically has to give shareholders six weeks to consult on a buyout, which would bring together two of Switzerland’s biggest lenders.
Three people briefed on the situation said UBS indicated that emergency measures would be used to be able to skip the consultation phase and pass the deal without a shareholder vote. The details are still being worked out, one of the people said.
Swiss regulator Finma did not immediately respond to requests for comment. The Swiss central bank, Credit Suisse and UBS declined to comment.
The Swiss National Bank and the Finma regulator have told their international partners that they see a deal with UBS as the only option to prevent a collapse of confidence in Credit Suisse and are working to achieve it. legal agreement on Saturday night.
UBS said it will continue with Credit Suisse’s plan to downsize its investment banking, so that the consolidated organization will account for no more than a third of the merged group, the two sources said.
The Swiss cabinet held an emergency meeting on Saturday night to discuss the future of Credit Suisse. The Cabinet gathered at the Ministry of Finance in Bern to hear a series of presentations by government officials, the Swiss National Bank, the Finma market regulator and representatives of the banking industry.
The boards of the two banks will meet later this week. Credit Suisse’s main regulators in the US, UK and Switzerland are reviewing the legal structure of a deal and some of the concessions UBS has sought.
UBS wants to be allowed to make any requirements it faces under global capital rules for the world’s biggest banks. In addition, UBS has requested some form of government compensation or settlement to cover future legal costs, a source said.
Credit Suisse earmarks SFr1.2 billion for legal regulations by 2022, and warns that unresolved lawsuits and regulatory investigations could add another SFr1.2 billion.
UBS’s leadership team is concerned about Credit Suisse’s investment bank takeover, which has been the source of many scandals and losses in recent years, according to people familiar with their thinking. They wanted to reevaluate the case for splitting the bulk of their business into a new CS First Boston division.
The race for a deal comes days after the Swiss central bank was forced to provide an emergency 50 billion SFr ($54 billion) credit limit for Credit Suisse.
This has failed to stem the plunge in its share price, which has fallen to record lows after its biggest investor ruled out providing more capital and its chairman admitted that An exodus of wealth management clients continues.
According to two people familiar with the situation, inflows from Credit Suisse exceeded 10 billion SFr ($10.8 billion) a day last weekend as concerns about its health grew.
Shares of other European banks also hit strongly by the crisis of confidence that stemmed from the collapse of Silicon Valley Bank last weekend.
The future takeover reflects the stark difference in the fortunes of the two banks. Over the past three years, shares of UBS have risen about 120% while shares of its smaller rival have fallen about 70%.
The former has a market capitalization of $56.6 billion, while Credit Suisse closed trading on Friday at $8 billion. In 2022, UBS generated $7.6 billion in profits, while Credit Suisse lost $7.9 billion, wiping out all of the previous decade’s earnings.
Swiss regulators told their US and UK counterparts on Friday night that merging the two banks is a “plan A” to prevent a collapse in investor confidence in Credit Suisse , one of the people said. There is no guarantee that an agreement will be reached.
Negotiators have given Credit Suisse the codename Cedar and UBS known as Ulmus, according to people briefed on the matter.
The fact that SNB and Finma supported the Swiss solution deterred other potential bidders. American investment giant BlackRock has outlined a rival approach, evaluated several options and spoke with other potential investors, according to people briefed on the matter.
The full merger between UBS and Credit Suisse will create one of the most important financial institutions with the largest global system in Europe. UBS has total assets of $1.1 trillion on its balance sheet and Credit Suisse has $575 billion. However, such a big deal could prove too difficult to execute.
The Financial Times previously reported that other options under consideration include a Credit Suisse split and raising capital through a public offering of its hedged Swiss division, with asset managers. property and assets sold to UBS or other contractors.
UBS has been put on high alert for an emergency bailout call from the Swiss government after investors became wary of Credit Suisse’s most recent restructuring. Last year, chief executive Ulrich Körner announced plans to cut 9,000 jobs and spin off much of his investment banking into a new entity called First Boston, led by former board member Michael Klein operating.
With additional reporting by Sam Jones in Zurich
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