The damaged Credit Suisse is swallowed up by its rival: After difficult negotiations, the bank goes to the big bank UBS.
The future of Credit Suisse has been decided: the major bank UBS will take over its competitor. This was announced by the Swiss Federal Council and representatives of the two institutes and the supervisory authorities at a press conference on Sunday evening. The purchase price is 3 billion Swiss francs, the equivalent of around 3.02 billion euros. UBS announced that the purchase price would be paid in treasury shares.
According to media reports, the major bank had previously offered CHF 1 billion, then CHF 2 billion. The Swiss National Bank (SNB) is supporting the takeover with liquidity assistance of CHF 100 billion (around EUR 101 billion) to both banks.
The merged bank will manage more than $3.4 trillion in assets. The merger should be completed by the end of the year. “This acquisition is attractive for UBS shareholders, but it is clear – as far as Credit Suisse is concerned, this is an emergency rescue,” said Colm Kelleher, Chairman of the Board of Directors. He will also be president of the new bank, UBS boss Ralph Hamers the CEO.
The takeover of the second largest Swiss bank Credit Suisse by UBS is the most significant bank merger in Europe since the financial crisis 15 years ago. This was preceded by a marathon of negotiations that lasted the whole weekend, in which the parties involved from the two banks as well as top representatives from politics and the supervisory authorities took part.
Step to stabilize the financial sector
“With the takeover of Credit Suisse by UBS, a solution was found to ensure financial stability and protect the Swiss economy in this extraordinary situation,” said the SNB in a statement. This contributes to the stability of the entire financial sector.
In order to reduce any risks for UBS, the federal government is also issuing a guarantee of CHF 9 billion to cover potential losses. The measures taken will ensure that the SNB can provide Credit Suisse with extensive liquidity if necessary. Finma approved the takeover. Both banks could continue all business activities.
The Swiss government had urged UBS to take over the bank in order to restore confidence in Credit Suisse and prevent the crisis from spreading to other banks in Europe.
Credit Suisse has recently come under further pressure after a series of previous scandals, including the closure of two US banks, Silicon Valley Bank and Signature Bank, which had worried the financial sector. Statements by Credit Suisse’s largest shareholder, the Saudi National Bank from Saudi Arabia, that it did not want to increase investments in the second-largest Swiss bank sent the price plummeting.
