UBS to buy Credit Suisse for $3.24bn in government-brokered deal | Banks


Authorities had been scrambling to rescue Credit score Suisse earlier than monetary markets reopened on Monday.

Switzerland’s largest financial institution, UBS, has agreed to purchase Credit score Suisse for 3 billion Swiss francs ($3.24bn), officers from the banks have mentioned, in a deal designed to comprise a widening disaster of confidence in global finance.

The settlement, introduced late on Sunday, consists of 100 billion francs ($108bn) in liquidity help for UBS and Credit score Suisse from the Swiss central financial institution.

“With the takeover of Credit score Suisse by UBS, an answer has been discovered to safe monetary stability and defend the Swiss financial system on this distinctive state of affairs,” the Swiss central financial institution mentioned.

The Swiss Monetary Market Supervisory Authority (FINMA) mentioned that there was a danger that Credit score Suisse might have grow to be “illiquid, even when it remained solvent, and it was mandatory for the authorities to take motion”.

To allow UBS to take over Credit score Suisse, the federal authorities is offering a loss assure of a most of 9 billion francs ($9.7bn) for a clearly outlined a part of the portfolio, the federal government mentioned.

This will probably be activated if losses are literally incurred on this portfolio. In that eventuality, UBS would assume the primary 5 billion francs ($5.4bn), the federal authorities the following 9 billion francs ($9.7bn), and UBS would assume any additional losses, the federal government mentioned.

Credit score Suisse, a 167-year-old financial institution, has been the most important identify ensnared in market turmoil unleashed by the current collapse of United States lenders Silicon Valley Financial institution and Signature Financial institution, forcing it to faucet $54bn in central financial institution funding final week.

Authorities had been scrambling to rescue Credit score Suisse, among the many world’s largest wealth managers, earlier than monetary markets reopened on Monday.

FINMA, which mentioned it had accepted the takeover, mentioned current measures to stabilise itself have been “not sufficient to revive confidence within the financial institution, nevertheless, and extra far-reaching choices have been additionally examined”.

UBS and Credit score Suisse are each in a bunch of the 30 world systemically vital banks watched intently by regulators, and Credit score Suisse’s failure would ripple all through all the monetary system.

The announcement got here in a make-or-break weekend after some rivals grew cautious of their dealings with the struggling Swiss lender, and its regulators urged it to pursue a cope with UBS.

The 2 banks’ fortunes have diverged sharply over the previous yr. UBS earned $7.6bn in revenue in 2022, whereas Credit score Suisse misplaced $7.9bn. Credit score Suisse’s shares are down 74 % from a yr in the past, whereas UBS’s are comparatively flat.

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