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Switzerland’s largest bank UBS agrees to buy Credit Suisse crisis in historic transaction

Switzerland's largest bank UBS agrees to buy Credit Suisse crisis in historic transaction

Chairman Axel Lehmann said the merger represented “the best outcome available.”

Bern Switzerland:

UBS will take over struggling Swiss rival Credit Suisse for $3.25 billion after tough talks on Sunday aimed at preventing the struggling bank from triggering a banking crisis broader international market.
The government says the deal involving Switzerland’s biggest bank taking over the second is crucial to preventing irreversible economic turmoil from spreading across the country and beyond. .

The move has been welcomed in Washington, Brussels and London as it will aid financial stability.

After a dramatic day of negotiations at the Ministry of Finance in the capital Bern – and as the clock ticks ahead of Monday’s market opening in Asia and then Europe – the details of the takeover have been announced. announced at a press conference.

Accompanying Swiss President Alain Berset were UBS President Colm Kelleher and Credit Suisse counterpart Axel Lehmann, along with Swiss Finance Minister and heads of the Swiss Central Bank (SNB) and regulators FINMA finance.

The wealthy Alpine nation is known for its banking prominence, and Berset said the takeover was “the best solution to restore confidence that has been lacking in the financial markets recently”.

If Credit Suisse were in free fall, it would have “incalculable consequences for the country and for international financial stability”, he said.

Credit Suisse said in a statement that UBS would take over it because of “a merger review worth three billion Swiss francs ($3.25 billion),” with Credit Suisse shareholders receiving one UBS share for 22.48 shares of Credit Suisse.

“Given recent unusual and unprecedented circumstances, the announced merger is the best outcome available,” Lehmann said.

Risk of ‘major collateral damage’

Finance Minister Karin Keller-Sutter said the Credit Suisse bankruptcy could cause “irreparable economic chaos” and “major collateral damage” to the Swiss financial markets. mentioning the “risk of contagion” to other banks, including UBS itself.

She said the takeover had “laid the foundations for greater stability both in Switzerland and internationally”.

The agreement has been warmly received internationally, with European Central Bank chief Christine Lagarde hailing “swift action”.

She said the decisions taken in Bern “were instrumental in restoring orderly market conditions and ensuring financial stability. The eurozone banking sector is resilient, with a strong standing position. liquidity and strong capital”.

“We welcome the announcements made by the Swiss authorities today to support financial stability,” Fed Chair Jerome Powell and Treasury Secretary Janet Yellen said in a joint statement.

He also said the deal would “support financial stability”.

Keller-Sutter said her American and British colleagues “really fear that Credit Suisse could go bankrupt, with all the losses”.

The SNB has announced that 100 billion Swiss francs of liquidity will be available.

Keller-Sutter insists the deal is “a commercial solution, not a bailout.”

UBS President Kelleher added: “We are committed to making this deal a great success.

“This is absolutely essential to the financial structure of Switzerland.

“UBS will remain solid,” he insisted.

Too big to fail?

Like UBS, Credit Suisse is one of 30 banks worldwide that are considered Global System Important Banks — so important to the international banking system that they are considered too big. to be able to crash.

But market movements seem to suggest that the bank is being seen as a weak link in the chain.

Amid fears of contagion following the collapse of two US banks, Credit Suisse’s share price fell more than 30% on Wednesday to a new record low of 1.55 Swiss francs. That saw the SNB enter the night with a $54 billion lifeline.

After recovering some ground on Thursday, its shares closed down 8% on Friday at 1.86 Swiss francs as the Zurich-based lender struggled to stay afloat. investor confidence.

In 2022, the bank posted a net loss of $7.9 billion and expects a “significant” pre-tax loss this year.

A UBS statement said Credit Suisse shareholders will receive 0.76 Swiss francs per share.

After a massive stock market plunge last week, Credit Suisse’s share price closed Friday at 1.86 Swiss francs, with a bank value of just over $8.7 billion. .

Credit Suisse’s share price fell from 12.78 Swiss francs in February 2021 due to a series of scandals it could not shake off.

The Swiss Bankers’ Association said there was “a lot of risk” to Credit Suisse’s 17,000 employees, “and therefore also to our economy”.

In addition, tens of thousands of jobs outside the banking industry are potentially at risk.

(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)


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