The deal was made “urgently” and “under pressure” from Switzerland’s main economic partners to avert widespread panic on the stock market. The Swiss government will provide UBS with his €9 billion guarantee for this acquisition.
Switzerland’s largest bank UBS agreed on Sunday to buy rival Credit Suisse for $2 billion after pressure from authorities, according to the Financial Times.
This figure is double the initial offer made in an operation aimed at preventing entity collapse and market panic. According to The New York Times, UBS agreed to double his original offer to overcome the reluctance of Credit Suisse and his one of its major shareholders.
Assuming a price of 0.5 Swiss francs for Credit Suisse shares, this operation is done only for UBS shares. This is double the originally proposed 0.25 but still well below the 1.86 francs traded Friday’s close.
The merger of two giant banks, part of a group of 30 banks considered important in the global financial system, should be completed and announced in time for the opening of Asian markets. We hope this announcement is enough to prevent general panic.
The banking sector has been under strain since major central banks sharply raised interest rates in an attempt to curb inflation.
Swiss Confederation President Alain Berset affirmed that it was the best way to “restore confidence”. It is also critical to the stability of our entire financial system,” Belset said.
Impact of the bankruptcy of Silicon Valley Bank
The failure of Silicon Valley Bank and other regional banks in the United States has increased investor anxiety and created crises for other institutions that were considered weak. This is the case of Credit Suisse, where he has spent two years immersed in various scandals that have not been resolved despite management efforts to announce a three-year restructuring plan.
Under immense pressure from Switzerland’s main economic partners, regulators and the federal government acted to clean up the situation before it spread to the rest of the world.
UBS is asking the government to cover legal costs and potential losses, which could amount to billions of francs, according to Bloomberg.
After years of recovering from the 2008 financial crisis and massive state bailouts, UBS is beginning to pay off in its efforts. As such, it took a great deal of effort on the part of the authorities before the bank’s management agreed to act as a savior for Credit Suisse.
Switzerland gives UBS €9 billion guarantee to buy Credit Suisse
Finance Minister Karin Keller-Sutter said, citing risks, the Swiss Confederation will provide guarantees worth more than 9 billion euros to mitigate the risk UBS Bank will take over Credit Suisse. .
The guarantees act “as if they were insurance”, covering the eventual losses of Credit Suisse “of a very specific portfolio” and if these losses exceed a threshold not specified by the Minister. only covered.
Keller Sutter said the failure of Credit Suisse “would have had irreversible consequences” not only for Swiss banks, but also for the world’s banks. I have a loss,” he said.