UBS acquires Credit Suisse under an agreement brokered by the Swiss government. : NPR
Igor Golovniov/SOPA Images/LightRocket via Getty Images
With the impeccable timing of one of the country’s famous watches, Swiss officials brokered a last-minute emergency takeover of troubled bank Credit Suisse by fellow banking giant UBS.
At a news conference on Sunday, Swiss President Alain Berset said recent turmoil in the banking sector had destabilized Credit Suisse and that the deal was vital to stabilizing the bank and the global banking industry.
As part of the agreement, UBS Group AG will buy Credit Suisse in an all-stock transaction. UBS will also receive an additional $100 billion from the Swiss central bank as part of the deal.
The marriage between UBS and its struggling rival Credit Suisse marks the latest eruption of the ongoing banking troubles sparked by the collapse of Silicon Valley Bank.
Panicked investors and nervous depositors have withdrawn billions from struggling Credit Suisse in recent days, raising fears the bank could become insolvent unless emergency action is taken. The Swiss central bank threw a life of $54 billion at Credit Suisse, but that was not enough to stabilize the institution.
It’s yet another astonishing development on top of a week of turmoil and alarm in the banking sector, all the more worrisome given that Credit Suisse is a so-called “global systemically important bank.” This basically means that if Credit Suisse fails, it could have ripple effects throughout the global economy.
A history of troubles
Credit Suisse’s crisis boiled over last week, when the bank announced “significant weaknesses” in its financial reports.
But the bank’s problems began long before that, with a series of financial and political scandals that rocked the bank’s reputation and bottom line. In the past two years alone, the bank’s shares have fallen more than 80%.
Credit Suisse was created 166 years ago to help finance the Swiss rail network. It has become an international name in banking and one of the largest banks in the world
But the bank’s reputation has taken several huge hits in recent years, including being linked to a money laundering operation involving a cocaine trafficking ring in Bulgaria and hiring detectives to spy on an executive who left to work at a bank. rival.