UBS Seals Credit Suisse Acquisition To Calm Markets

: UBS has signed a deal to buy rival Swiss bank Credit Suisse to avoid further market turmoil in global banking, Swiss officials said on Sunday.

Swiss regulators have been forced to intervene and adjust transactions to prevent a crisis of confidence in Credit Suisse from spilling over into the wider financial system.

The Swiss finance minister said the bankruptcy of a globally important bank would have irreversible consequences for financial markets.

It is not yet clear whether the deal will be enough to restore confidence in lenders around the world. The first signs could appear when the Asian, Australian and New Zealand stock markets open in the next few hours.

The Swiss Central Bank said at a press conference in the Swiss capital Bern that it would provide a substantial amount of liquidity to the merged bank. The deal includes 100 billion Swiss francs ($108 billion) in liquidity support to UBS and Credit Suisse, he said.

“With UBS’s takeover of Credit Suisse, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss Central Bank said.

The amount of the deal was not immediately disclosed. An earlier report in the Financial Times put it at more than $2 billion.

The Swiss Financial Market Supervisory Authority (FINMA) said it would be possible to continue all business activities of both banks without restrictions or interruptions. FINMA said it would coordinate with national and international bodies, namely the US Federal Reserve and the UK Prudential Regulatory Agency.

The 167-year-old bank, one of the world’s largest wealth managers, was rushed to the rescue by authorities after a brutal week saw the second and third largest US bank failures in history. embarked on. As one of the 30 global banks deemed systemically important, Credit Suisse’s deal could have ripple effects in global financial markets.

At least two major European banks are considering scenarios that could spread the infection to the regional banking sector, prompting the Federal Reserve and European Central Bank to intervene with stronger signals of support. Are expected.

The weekend’s talks follow efforts in Europe and the US to support the sector since the collapses of US lenders Silicon Valley Bank and Signature Bank. The administration of US President Joe Biden made moves to boost consumer deposits, but the Swiss central bank lent billions of dollars to Credit Suisse to stabilize its balance sheet.

A crisis of confidence in Credit Suisse and the fallout of two U.S. banks could ripple through the financial system this week, two executives separately told Reuters on Sunday.

Credit Suisse shares lost a quarter of their value last week. The bank was forced to raise its $54 billion in funding from the central bank in an attempt to bounce back from a scandal that undermined investor and customer confidence.

Swiss authorities are considering imposing losses on Credit Suisse bondholders as part of a bank bailout, two sources familiar with the matter said on Sunday.

But European regulators are concerned about such a move because it could hurt investor confidence elsewhere in Europe’s financial sector, the sources said, asking not to be identified. rice field.

According to Bloomberg, U.S. officials are working with their Swiss counterparts to help broker the deal, and Sky News said the Bank of England has told its international counterparts and UBS that Credit Corp., which sees Britain as a major He said he was showing support for the Swiss takeover offer. market.