San Francisco, NFAPost: Taking head on the challenges, Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion. It is a deal orchestrated by regulators in an effort to avoid further market-shaking turmoil in the global banking system.
Swiss authorities pushed for UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and the bank’s customers. Shares of Credit Suisse and other banks plunged this week after the failure of two banks in the US sparked concerns about other potentially shaky institutions in the global financial system.
Credit Suisse is among the 30 financial institutions known as globally systemically important banks, and authorities worried about the fallout if it were to fail.
The deal was one of great breadth for the stability of international finance,” said Swiss President Alain Berset as he announced it Sunday night. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.
Switzerland’s executive branch, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without shareholder approval.
Credit Suisse Chairman Axel Lehmann called the sale a clear turning point.
It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets, Lehmann said, adding that the focus is now on the future and in particular on the 50,000 Credit Suisse employees, 17,000 of whom are in Switzerland.
Following news of the Swiss deal, the world’s central banks announced coordinated financial moves to stabilize banks in the coming week. This includes daily access to a lending facility for banks looking to borrow US dollars if they need them, a practice which widely used during the 2008 financial crisis. Three months after Lehman Brothers collapsed in September of 2008, such swap lines had been tapped for USD 580 billion. Added swap lines were also rolled out during market turmoil in the early stages of the COVID-19 pandemic in March of 2020.
Today is one of the most significant days in European banking since 2008, with far-reaching repercussions for the industry,” said Max Georgiou, an analyst at Third Bridge. These events could alter the course of not only European banking but also the wealth management industry more generally.
Colm Kelleher, the UBS chairman, hailed the enormous opportunities that emerge from the takeover, and highlighted his bank’s conservative risk culture a subtle swipe at Credit Suisse’s reputation for more swashbuckling, aggressive gambles in search of bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.
Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.
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