Switzerland’s biggest bank, UBS, has agreed to buy struggling rival Credit Suisse in an emergency bailout deal aimed at stemming financial market panic sparked by the failure of two US banks earlier this year. month.
“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. He said the rescue would “ensure financial stability and protect the Swiss economy”.
UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank’s value at the close of trading on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for shares that were worth 1.86 Swiss francs on Friday.
Exceptionally, the deal will not need shareholder approval after the Swiss government agreed to change the law to remove any uncertainty over the deal.
Credit Suisse (CS) had been losing investor and client confidence for years. In 2022, it recorded its worst loss since the global financial crisis. But confidence plummeted last week after it acknowledged a “material weakness” in its accounting and as the demise of Silicon Valley Bank and Signature Bank sowed fear of weaker institutions at a time when the soaring interest rates undermined the value of some financial assets.
Shares in the 167-year-old bank fell 25% over the week as money poured in from the investment funds it manages and at one point account holders were withdrawing deposits of more $10 billion a day, reported the Financial Times. An emergency loan of nearly $54 billion from the Swiss National Bank failed to stop the bleeding.
But it has “built a bridge” to the weekend, to allow the rescue to be replenished, Swiss officials said on Sunday evening.
“This acquisition is attractive to UBS shareholders but, let’s be clear, as far as Credit Suisse is concerned, this is an emergency rescue,” UBS Chairman Colm Kelleher told reporters. .
“It’s absolutely essential for the financial structure of Switzerland and…for global finance,” he told reporters.
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