In the midst of the financial crisis, Switzerland’s Biggest Bank Buys Crisis-Hit Credit Suisse

The largest bank in Switzerland, UBS, and Credit Suisse have combined, with UBS emerging as the victor, according to a press release issued by the Zürich-based wealth manager.

In order to restore trust in the stability of the Swiss economy and financial system, the Swiss Federal Department of Finance, the Swiss National Bank, and the Swiss Financial Market Supervisory Authority (FINMA) proposed the merger.

After days of tense negotiations involving financial regulators from Switzerland, the US, and the UK, the emergency acquisition was approved.

Each Credit Suisse shareholder will get one UBS share in exchange for 22.48 Credit Suisse shares as merger consideration. By the end of 2023, the merger is anticipated to be complete. This conversion factor accounts for a merger consideration of CHF (Switzerland Francs) 3 billion ($3.23 billion) for all of Credit Suisse’s shares; up to $5.4 billion in losses at the bank will be taken on by UBS.

Credit Suisse was informed by FINMA on Sunday that Credit Suisse’s Additional Tier 1 Capital, which was derived via the issue of Tier 1 Capital Notes, will be written down to zero and will total roughly CHF 16 billion ($17 billion).

The Swiss Federal Council is issuing an emergency ordinance (Notverordnung) specific to this transaction in light of the unusual conditions affecting the Swiss economy as a whole. The merger will be carried out without the permission of UBS and Credit Suisse shareholders, which would ordinarily be required to increase deal certainty.

In order to increase deal certainty, the merger has been carried out without the consent of UBS and Credit Suisse shareholders. In cooperation with UBS, Credit Suisse will carry out its restructuring initiatives while continuing to conduct regular business. According to the Chairman of the Credit Suisse Board of Directors, given the current situation, this combination offers the best result.

The accord comprises 100 billion Swiss francs ($108 billion) in liquidity support for UBS and Credit Suisse, the Swiss central bank announced on Sunday.

Fallout from American Banks’ Collapse Impacted Credit Suisse
Shares of Credit Suisse dropped by 25% last week. The bank was need to borrow $54 billion from the central bank in order to recover from scandals that damaged trust.

Investors and clients had been losing faith in Credit Suisse (CS) for years. Since the start of the world financial crisis in 2022, it has suffered its worst loss. The failures of Silicon Valley Bank and Signature Bank, which spread concern about weaker institutions at a time when rising interest rates have diminished the value of some financial assets, also contributed to a decline in confidence last week after it acknowledged “material weaknesses” in its bookkeeping.

The most recent repercussion of Silicon Valley Bank’s failure is the dissolution of Credit Suisse. Notwithstanding the fact that SVB was a relatively tiny lender that largely conducted business in the United States, its quick decline reawakened in investors and depositors a dread of potential hazards lurking at other institutions, especially when central banks boost interest rates to combat growing inflation.

Global banking stocks had a sharp decline last week, losing about $500 billion in market value. The largest US banks led a $30 billion bailout of the San Francisco-based First Republic Bank as one example of how regulators and significant lenders went above and beyond to avert a wider catastrophe. Yet, no foreign lender was hammered as badly as Credit Suisse, whose shares this week dropped to new lows amid a constant drip of negative news.

For what it’s worth, the UBS transaction strengthens another while bringing to an end one banking legend.


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