Banking giant UBS has agreed to buy Credit Suisse, a smaller rival, Swiss authorities announced Sunday. The historic deal comes as major financial institutions continue to scramble and work to avoid a wider crisis following the sudden collapse of Silicon Valley Bank earlier this month.
“The takeover was made possible with the support of the Swiss Federal Government, the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank,” the Swiss National Bank said in a statement. “With the acquisition of Credit Suisse by UBS, a solution has been found to protect financial stability and the Swiss economy in these exceptional circumstances.”
At a press conference Sunday afternoon to discuss the emergency purchases, FINMA president Karin Keller-Sutter said “Switzerland has to take responsibility beyond its own borders,” adding that the agreement was reached in an effort to avoid “irreparable economic” in Switzerland and around the world. Turmoil.” Keller-Sutter said the purchase “laid the foundation for greater stability both in Switzerland and internationally.”
Concerns about the stability of the global banking system have spread across the US and Europe In the wake of the failures of Silicon Valley Bank and Signature Bank, which happened less than two weeks ago and within days of each other. Their closures prompted rare moves by the federal government as well as some of the largest U.S. banks to boost funding to institutions that were threatened by the turmoil.
Credit Suisse received About $54 billion from Swiss National Bank as part of those talks last week, when a consortium of 11 major US banks, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, agreed to provide $30 billion in funding for First Republic Bank. These four banks each agreed to contribute $5 billion, while Goldman Sachs and Morgan Stanley each agreed to pay $2.5 billion, and BNY Mellon, PNC Bank, State Street, Trust and US Bank each agreed to pay $1 billion.
The emergency fund pledge on Thursday briefly halted the ongoing slide in both banks’ stocks, which resumed the next day. On Friday, Credit Suisse shares fell 7% to end the day at $2.01.
For Credit Suisse, Switzerland’s second-largest commercial bank, shares fell 30% on six stock exchanges after its largest shareholder said Don’t keep any money within the organization. The bank faced problems before the failures of US banks fueled fear and lack of confidence among big investors, and it announced plans to borrow up to 50 billion francs from the national bank on Thursday.
“This additional liquidity will support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built on customer needs,” Credit Suisse said in a statement at the time.
The Saudi National Bank told news outlets it would not inject additional funds into the institution as it sought to avoid applicable regulations, a day before a sharp drop in its share price marked a record-low for Credit Suisse. A stake in the Swiss lender above 10%. The volatility led to the automatic halt of trading in Credit Suisse’s shares on the Swiss market and significantly affected shares of other major European banks, with some share prices falling by double-digits.
Despite Credit Suisse’s move to finance the Swiss National Bank, Capital Economics Analyst He said there remain concerns about the company’s health, especially since it has not been profitable in two years.
Andrew Cunningham, chief European economist at Capital Economics, said in an investor note on Friday that, while Credit Suisse plans to restore business within three years, “it is uncertain whether the markets will allow that time.”