The takeover should end the huge drop in stocks and bonds for the ailing bank in the wake of the collapse of smaller US banks. Credit Suisse has been under pressure for some time as customers continue to withdraw money from their accounts, fearing for the future of the bank. The chairman of the board of directors of the National Bank of Saudi Arabia, the largest shareholder, said on Wednesday that he had no desire to invest any more in Credit Suisse. That statement led to turmoil in the banking sector and Credit Suisse lost about a fifth of its market value.
The Swiss government brokered the deal to contain a crisis of confidence that threatens to ripple through financial markets around the world. The US authorities also consulted with their Swiss counterparts, as both UBS and Credit Suisse operate in both countries and are considered important banks of the global financial system. The Swiss wanted to finalize an agreement before stock markets opened up in Asia, so the hope is that the takeover can avoid a public panic.
The Swiss National Bank said on Sunday that it “supports UBS’ acquisition of Credit Suisse by providing significant cash assistance.” The two banks could receive support in the form of liquidity of up to CHF100 billion, according to BNS.
Switzerland also gives a guarantee of 9 billion francs to UBS to limit the risk to the bank of acquiring assets that could lead to losses, as long as these potential losses may exceed a certain threshold.
UBS will pay 1 share for 22.48 shares of its competitor in the course of the Credit Suisse acquisition. At the stock exchange’s closing bell on Friday evening, Credit Suisse was still valued at €7.4 billion. Thus, the shareholders will have almost nothing left.
President Berset said in a press conference on Sunday night that the sale was “crucial not only for Switzerland, but for the stability of the entire financial system.” He was flanked by senior executives of the two banks, Colm Kelleher of UBS and Axel Lehmann of Credit Suisse.
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