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UBS to buy Credit Suisse for $3.24bn in government-brokered deal

Authorities tried to bail out Credit Suisse before financial markets reopened on Monday.

Switzerland’s largest bank, UBS, has agreed to buy Credit Suisse for 3 billion Swiss francs ($3.24 billion), bank officials said, in a deal designed to ease a deepening crisis of confidence in to contain the global financial world.

The deal, announced late Sunday, includes 100 billion francs ($108 billion) in liquidity support for UBS and Credit Suisse from the Swiss central bank.

With the acquisition of Credit Suisse by UBS, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation.

The Swiss Financial Market Supervisory Authority (FINMA) said there was a risk that Credit Suisse “would have become illiquid, even if it remained solvent, and that authorities had to take action”.

To enable UBS to acquire Credit Suisse, the federal government is providing a loss guarantee of up to 9 billion francs ($9.7 billion) for a clearly defined portion of the portfolio, the government said.

This is activated if losses are actually incurred on this portfolio. In that case, UBS would absorb the first 5 billion francs ($5.4 billion), the federal government the next 9 billion francs ($9.7 billion), and UBS would absorb all further losses, the government said. .

Credit Suisse, a 167-year-old bank, is the biggest name caught in the market turmoil unleashed by the recent collapse of US lenders Silicon Valley Bank and Signature Bank, which left it with $54 billion in funding last week. of the central bank.

Authorities tried to bail out Credit Suisse, one of the world’s largest asset managers, before financial markets reopened on Monday.

FINMA, which said it had approved the acquisition, said recent self-stabilization measures “were not enough to restore confidence in the bank, and more far-reaching options were also being explored.”

UBS and Credit Suisse are both part of a group of the 30 globally systemically important banks that are closely watched by regulators, and Credit Suisse’s failure would ripple through the entire financial system.

The announcement came on an all-or-nothing weekend after some rivals became cautious in their dealings with the struggling Swiss lender and regulators urged him to pursue a deal with UBS.

The fortunes of the two banks diverged widely over the past year. UBS earned $7.6 billion in profits in 2022, while Credit Suisse lost $7.9 billion. Credit Suisse shares are down 74 percent from a year ago, while UBS’s are relatively flat.