HomeMiddle EastUBS to buy Credit Suisse for $3.24 billion in government-brokered deal

UBS to buy Credit Suisse for $3.24 billion in government-brokered deal

Authorities had been scrambling to rescue Credit Suisse before financial markets reopened on Monday.

Switzerland’s largest bank, UBS, has agreed to buy Credit Suisse for 3 billion Swiss francs ($3.24 billion), bank officials said, in a deal designed to contain a widening crisis of confidence in world finances.

The deal, announced late Sunday, includes 100 billion francs ($108 billion) in liquidity assistance for UBS and Swiss central bank Credit Suisse.

“With the acquisition of Credit Suisse by UBS, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss central bank said.

The Swiss Financial Markets Supervisory Authority (FINMA) said there was a risk that Credit Suisse had become “illiquid, even if it remained solvent, and action was needed from the authorities.”

To allow UBS to take over Credit Suisse, the federal government offers a loss guarantee of a maximum of 9 billion francs ($9.7 billion) for a clearly defined part of the portfolio, the government said.

This will be triggered if losses are actually incurred on this portfolio. In that event, UBS would bear the first 5 billion francs ($5.4 billion), the federal government the next 9 billion francs ($9.7 billion) and UBS would bear any additional losses, the government said.

Credit Suisse, a 167-year-old bank, has been the biggest name caught up in the market turmoil sparked by the recent collapse of US lenders Silicon Valley Bank and Signature Bank, forcing it to raise $54 billion in funding from the central bank last week.

Authorities had been scrambling to bail out Credit Suisse, one of the world’s biggest wealth managers, before financial markets reopened on Monday.

FINMA, which said it had approved the acquisition, said recent stabilization measures “were not enough to restore confidence in the bank, however, and more far-reaching options were also being examined.”

UBS and Credit Suisse are among a group of 30 global systemically important banks closely watched by regulators, and a Credit Suisse failure would spread throughout the financial system.

The announcement came on a crucial weekend after some rivals turned cautious in their dealings with the struggling Swiss lender, and its regulators urged it to seek a deal with UBS.

The fortunes of the two banks have diverged sharply over the past year. UBS made $7.6 billion in profit in 2022, while Credit Suisse lost $7.9 billion. Credit Suisse’s shares are down 74 percent from a year earlier, while UBS’s are relatively flat.

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