Switzerland plans to nationalize ailing bank – Bloomberg – RT World News
A partial or full government takeover of Credit Suisse is on the table if a proposed merger with rival UBS fails
The Swiss authorities are considering a “total or partial nationalization” of struggling banking giant Credit Suisse Group if a complicated takeover plan by rival UBS Group fails to gain shareholder and regulator approval, inside sources told Bloomberg on Sunday.
Zürich East “consider either taking over the bank in full or holding a significant stake in the capital” if the UBS deal fails “due to the complexity of arranging the deal and the short time frame involved”, the sources explained, adding that regulators are eager to close the deal before Asian markets open to avoid further erosion of public confidence in the banking system.
The UBS deal, in which the megabank would have taken over Credit Suisse for a whopping $1 billion, leaves the Swiss government liable if the acquisition fails to quell instability in the system. If the bank’s credit default spread increases by 100 points or more, UBS can simply walk out of the deal, leaving Zurich and regulators to hold the bag. The nationalization of Credit Suisse would apparently leap directly to this eventuality.
Authorities have reportedly already agreed to a rewrite of Swiss banking laws to allow companies to circumvent mandatory shareholder voting and speed up the merger.
Credit Suisse considers the valuation to be far too low, and the deal is also unpopular with the bank’s shareholders, as it would have paid them only CHF 0.25 in UBS shares per share when their holdings were still worth 1, CHF 86 at market close. Friday. The merger would eliminate thousands of jobs from the failing bank, particularly in its investment banking division.
UBS also wants protection from any pending legal cases or regulatory investigations into its former rival that could lead to fines or losses, although a source involved in the deal told the Financial Times that it is unlikely. he enjoys such immunity.
Credit Suisse has been haemorrhaging deposits for weeks amid a series of scandals and regulatory issues. As several U.S. bank failures triggered massive systemic bank runs last week, outflows reached 10 billion francs a day and corporate stocks lost a quarter of their value, necessitating a $54 billion loan from the Swiss National Bank. Regulators worry that this alone is not enough to boost confidence in the financial system.
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