By John O’Donnell
March 18 (Reuters) – UBS AG was studying on Saturday the possibility of acquiring troubled bank Credit Suisse, for which the Swiss government could offer a guarantee against the risks that would entail, two people familiar with the matter said.
Credit Suisse, 167 years old, is the entity most affected by the stock market turmoil triggered by the bankruptcy of the US banks Silicon Valley Bank (SVB) and Signature Bank last week, and its fall has fueled fears of banking problems in larger span.
To control the crisis, UBS was coming under pressure from Swiss authorities to carry out a takeover, Reuters sources said. Under the plan, Credit Suisse’s Swiss business could be spun off, they added.
UBS and Swiss regulator FINMA declined to comment when contacted by Reuters.
Credit Suisse Chief Financial Officer Dixit Joshi and his teams met over the weekend to weigh their options for the bank, people with knowledge of the matter said.
The bank’s share price has swung wildly this week, during which it has been forced to draw on $54 billion of central bank financing, and Credit Suisse had lost a quarter of its market value as of Friday morning. evening.
The mood in Switzerland, long considered an icon of banking stability, was pensive as executives debated the future of the country’s biggest lenders. “Banks in permanent tension,” headlined the Neue Zuercher Zeitung newspaper on Saturday morning.
Credit Suisse is one of the world’s largest wealth managers and is considered one of the 30 global systemically important banks whose failure would send ripples through the entire financial system.
In a sign of their vulnerability, at least four of Credit Suisse’s main rivals, including Société Générale SA and Deutsche Bank AG, have placed restrictions on their dealings with the Swiss bank or its securities, five people with direct knowledge of the case told Reuters. affair.
Goldman Sachs cut its recommendation on exposure to European bank debt, saying a lack of clarity about Credit Suisse’s future would put pressure on the broader sector in the region.
Although the banking system was stronger than at the time of the 2008 financial crisis, “a stronger policy response is likely to be needed to bring some stability,” Goldman analyst Lotfi Karoui wrote in a note to clients.
This week, big US banks provided $30 billion to bail out small lender First Republic, while in recent days US banks have asked the Federal Reserve for a record $153 billion in emergency liquidity.
According to the Moody’s rating agency, which this week downgraded its outlook for the US banking system to negative, this reflects “financing and liquidity tensions in banks, driven by weakening depositor confidence.”
In Washington, attention has turned to increased oversight to ensure banks – and their executives – are held accountable.
THE PROBLEMS PERSISTE
Bank stocks around the world have been hit since the SVB bankruptcy, raising questions about other weaknesses in the financial system.
Shares of US regional banks fell sharply on Friday and the S&P Banks Index posted its biggest loss in two weeks since the pandemic rocked markets in March 2020, plunging 21.5%.
Although support from some of the biggest names in US banking prevented the First Republic from collapsing this week, investors were stunned by revelations about its cash position and the amount of emergency liquidity it needed.
The SVB bankruptcy, meanwhile, highlighted how a relentless campaign of interest rate hikes by the Fed and other central banks, including the European Central Bank this week, was putting pressure on the banking sector.
Many analysts and regulators have claimed that SVB’s downfall was due to its specialized, technology-focused business model, while the broader banking system was much stronger thanks to reforms adopted in the years following the global financial crisis. .
(Reporting from the Reuters offices; writing by Lincoln Feast and Toby Chopra; editing in Spanish by Carlos Serrano)
