UBS acquires Credit Suisse to stem the banking crisis

London (CNN) Switzerland’s biggest bank, UBS, has agreed to buy struggling rival Credit Suisse in an emergency bailout deal aimed at stemming financial market panic sparked by the failure of two US banks earlier this year. month.

“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. “This takeover was made possible thanks to the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority and the Swiss National Bank,” the central bank added.

He said the rescue would “ensure financial stability and protect the Swiss economy”.

Swiss credit (CS) had lost the trust of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But confidence plummeted last week after it acknowledged a “material weakness” in its accounting and as the demise of Silicon Valley Bank and Signature Bank sowed fear of weaker institutions at a time when the soaring interest rates undermined the value of some financial assets.

Shares in the 167-year-old bank fell 25% over the week as money poured in from the investment funds it manages and at one point account holders were withdrawing deposits of more $10 billion a day, reported the Financial Times. An emergency loan from the Swiss National Bank failed to stop the bleeding.

Desperate to prevent the meltdown from spreading through the global financial system on Monday, Swiss authorities had been pushing for a private sector bailout, while apparently considering plan B – full or partial nationalization.

The emergency takeover was decided after several days of frantic negotiations involving financial regulators in Switzerland, the United States and the United Kingdom. UBS (UBS) and Credit Suisse rank among the 30 largest banks in the global financial system, and together they hold nearly $1.7 trillion in assets.

The global headquarters of UBS and Credit Suisse are only 300 meters apart in Zurich, but the banks’ fortunes have recently taken very different paths. UBS shares have climbed 15% over the past two years, and it posted a profit of $7.6 billion in 2022. It had a market value of around $65 billion on Friday, according to Refinitiv.

Credit Suisse shares have lost 84% of their value over the same period and last year posted a loss of $7.9 billion. He was only worth $8 billion at the end of last week.

Dating back to 1856, Credit Suisse has its roots in the Schweizerische Kreditanstalt (SKA), which was created to finance the expansion of the rail network and the industrialization of Switzerland.

In addition to being the second largest bank in Switzerland, it manages the wealth of many of the world’s wealthiest people and offers global investment banking services. It had more than 50,000 employees at the end of 2022.

This is a developing story and will be updated.

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