The Swiss central bank has confirmed that Switzerland’s largest bank, UBS, will take over the second largest bank, Credit Suisse, which has found itself in liquidity problems. The Financial Times previously reported that the takeover was worth two billion euros.
The deal also includes 100 billion Swiss francs (101 billion euros) in liquidity support for UBS and Credit Suisse.
“With the acquisition of Credit Suisse by UBS, a solution was found to ensure financial stability and protect the Swiss economy in this exceptional situation,” announced the Swiss Central Bank at an extraordinary press conference of the Swiss government.
Credit Suisse is one of 30 banks in the world that are considered “too big to fail” because they are very important to the international banking system. The Swiss government already met in an extraordinary session on Saturday evening, but they did not make any statements.
The Swiss bank UBS initially offered up to one billion euros for the takeover of its competitor, but now it is said to have agreed to more than two billion euros, reports the Financial Times.
According to sources cited by the Reuters agency, UBS is also expected to ask the Swiss government to cover approximately $6 billion in costs in the event of the purchase of Credit Suisse.
Last year, Credit Suisse had a loss of 7.3 billion Swiss francs, while UBS had a profit of 7 billion, Špela Novak reported for Radio Slovenia. If there is no resolution by Monday, when markets resume trading, Credit Suisse’s shares will continue to fall, according to the British BBC.
The Swiss government is now said to be rushing to change the legislation to allow the takeover before Monday, in order to ensure the stability of the Swiss and global banking system. According to the current legislation, UBS shareholders would otherwise have six weeks to define before the takeover.
The Financial Times also writes that the number of jobs at the Credit Suisse bank would be reduced by around 10,000 after the takeover, which is said to be one of the biggest obstacles before the deal is signed. The Swiss Bankers’ Association called for the immediate establishment of a working group in which employees would also be included. As he points out, employees should not have to pay for management’s mistakes.
Credit Suisse’s liquidity problems
Credit Suisse, Switzerland’s second largest bank, which has been rocked by a number of scandals in recent years, including allegations of money laundering, came under pressure last week as the collapse of two regional US banks, SVB and Signature, rocked markets and the bank in warned about the weakness of internal controls in the annual report.
Its shares have fallen sharply in recent days, and the bank’s majority owner, the Saudi National Bank, has rejected further financial injections into the bank. The Swiss central bank loaned Credit Suisse 50 billion francs ($50.3 billion), but even that did not materialize.