UBS, the Swiss banking powerhouse, agreed to buy its old rival Credit Suisse for around $3 billion on Sunday in an emergency deal that averted the bankruptcy of one of the world’s biggest banks.
The two Swiss banks were roughly equal in 2010, but a series of bad decisions and investor fears had Credit Suisse on the verge of collapse. Even a $54 million loan from the Swiss National Bank last week could not save the lender.
“Let’s be clear, as far as Credit Suisse is concerned, this is an emergency bailout.” UBS Chairman Colm Kelleher he said in a press release. “We have structured a transaction that will preserve any remaining value in the business while limiting our downside exposure.”
Swiss authorities engineered the deal and forced it through without the approval of UBS shareholders.
Financial institutions around the world are struggling to restore investor confidence following the collapses of Silicon Valley Bank and Signature Bank in the US.
The chaotic climate made Credit Suisse “a leading indicator of fragilities in the global banking system,” according to Cornell University economist Eswar Prasad.
After the 2008 financial crisis, 30 banks around the world were labeled as globally systemically important, and 166-year-old Credit Suisse was one of them. But that didn’t stop bank leaders from making questionable investments and a series of disastrous decisions, including spying on UBS at one point.
Experts were quick to point out that Credit Suisse had been in trouble for years and that its possible collapse was not directly related to the US bank failures.
The bank was “in trouble because it’s been in trouble for a long time,” said economist Megan Greene of the Kroll Institute. “He has a host of other challenges that everyone is focusing on now because of the bank swings in the US.”
with cable news services
