The operation, which is sponsored by the Swiss National Bank, can count on public aid of around 5,500 million euros. Deutsche Bank is interested in some of the assets
A great movement in the global financial sector to find a way out of the serious crisis that Credit Suisse is going through. UBS is in talks to rescue Credit Suisse, in an emergency operation sponsored by the country’s financial authorities, which could count on public aid of around 6,000 million dollars (5,500 million euros) and which seeks to avoid a systemic failure. Bank. The talks were reported late on Friday by the Financial Times, which also indicated on Saturday that authorities were willing to ignore an obligation to give shareholders a consultation period to resolve the situation before Monday. Credit Suisse’s accelerated withdrawal of customer deposits at the rate of 10 billion euros a day last week brought the Swiss giant to the point of no return.
Credit Suisse’s fate will be decided this weekend and it has the global financial system on hold. The boards of directors of UBS and Credit Suisse met throughout Saturday to discuss a possible merger, with the Swiss National Bank and the Swiss financial market supervisor (Finma) coordinating communications. The news sent shares of Credit Suisse up 9% after-market on Friday night, after falling another 8% in the session.
Swiss financial regulators told their US and UK counterparts on Friday that merging the two banks was their Plan A in the face of the Credit Suisse plight. He intends to try to restore confidence in the Swiss financial system and find a solution before financial markets open next Monday. The merger process, in which the US authorities would also be working, could be completed in the next few hours. According to the Financial Times, asset management giant BlackRock was also interested in launching an offer, but the entity itself declined.
The Swiss bank is one of thirty banks considered to be of systemic importance and therefore its downfall will have a significant impact on the global financial system. In principle, in negotiations between the two Swiss banks, several alternatives are being considered, with a demerger of Credit Suisse being the most likely scenario. Both entities are evaluating possible regulatory difficulties in different jurisdictions and the consolidation problems of two banks with very similar profiles. Sources close to the communications reported by Reuters indicate that UBS intends to obtain blanket guarantees of around $6 billion to cover the cost of liquidating some Credit Suisse units and the possibility of litigation. In addition, the union of the two banks could mean 10,000 job cuts.
The merger of the two Swiss banks is the wish of the country’s financial authorities, who may lean in favor of UBS’s request to receive public support for the operation. The entity, which has rejected the possibility of merging with its rival in the past, will have particular interest in the asset management and high income divisions of Credit Suisse, a company that also has an interest in Deutsche Bank.
UBS’ bailout of Credit Suisse and its call for public support has once again sparked controversy over the use of taxpayers’ money to help financial institutions. After the 2008 financial crisis, banking regulations were tightened so that banks had anti-crisis debt buffers to respond to the need for capital injections. However, in the case of Credit Suisse, the use of this debt may not be enough, as was expected in the market on Friday.
UBS is already benefiting from the rapid loss of customers that Credit Suisse is currently experiencing, a factor that could make the purchase less attractive. But at the same time, the serious reputational and trust crisis unleashed by its competitor is an element in favor of participating in a solution that avoids a bigger crisis. Today, UBS has a market capitalization of $65 billion, compared with $8 billion for its Swiss rival.
Credit Suisse, 167, is the biggest financial institution mired in the new banking market crisis, triggered by the collapse of US banks Silicon Valley Bank (SVB) and Signature Bank last week. Faced with the collapse of shares and the flight of customers, the SNB agreed to inject €50 billion of liquidity into the entity, a measure that was welcomed in principle but turned out to be insufficient. The SVB crisis put the Swiss bank in trouble, beset by the loss of customers