Natalia Chi
Swiss President Alain Berset announced on Sunday evening that banking giant UBS will acquire smaller rival Credit Suisse to avoid further market-shaking turmoil in global banking.
Berset, who did not specify the value of the deal, described the announcement as “one of the great swings for international financial stability. An uncontrolled collapse of Credit Suisse could have devastating consequences for the country and the international financial system.” prize.”
Credit Suisse has been designated as one of the world’s systemically important banks by the Financial Stability Board, the international body that oversees the global financial system. This means regulators believe its uncontrollable failure will have ripple effects throughout the financial system, similar to the Lehman Brothers failure 15 years ago.
Sunday’s press conference spurred an enthusiastic and widespread response from the U.S. government to prevent further banking panic following the collapse of two of the country’s largest banks last week. Global financial markets have been strained since Swiss stocks began to plunge this week.
The 167-year-old Credit Suisse has already taken out a $50 billion or CHF 54 million loan from the Swiss National Bank, which temporarily boosted the bank’s share price. But the move didn’t seem to be enough to stem the outflow of deposits, according to news reports.
Still, many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that have led to the failure of Silicon Valley and Signature banks that have led to significant rescue efforts by the Federal Deposit Insurance Corporation and the Federal Reserve. . As a result, their downfall does not necessarily mark the beginning of a financial crisis such as that which occurred in 2008.
The deal caps a highly volatile week for Credit Suisse, most notably by its biggest investor, the Saudi National Bank, investing more money in banks to avoid regulation. The company’s stock plunged to a record low on Wednesday after it said it wouldn’t. It will start when the stake increases by about 10%.
Shares fell 8% on Friday and closed at CHF1.86, or $2, on the Swiss exchange. The stock has been in a long decline, trading at over CHF80 in 2007.
The current troubles began after Credit Suisse reported on Tuesday.
Although smaller than Swiss rival UBS, Credit Suisse still wields considerable influence, managing $1.4 trillion in assets. The company has significant trading desks around the world, serves the rich and wealthy through its wealth management business, and is a leading advisor to global corporations in M&A. Notably, Credit Suisse did not need government assistance during the 2008 financial crisis, but UBS did.
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