UBS agrees to take over Credit Suisse for more than $3bn to stem global banking crisis

The deal between Switzerland’s two biggest banks came after UBS raised its initial offer of $1bn

A full merger between UBS and Credit Suisse would create one of the largest financial institutions in the world. Reuters
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UBS agreed to buy Credit Suisse on Sunday after increasing its offer from $1 billion to more than $3 billion.

The Swiss National Bank has agreed to offer a $100 billion liquidity line to UBS as part of the deal.

Leading the discussions between Switzerland’s two biggest banks are the Swiss National Bank and the country’s regulator, Finma.

Credit Suisse, which is considered to be one of the systemically important banks globally and Switzerland’s second-largest lender, is the latest major bank to be hit by a liquidity crisis.

Over the past week, bank runs have hit US lenders Silvergate Capital, Signature Bank and, most notably, Silicon Valley Bank.

All collapsed, having been largely involved in the technology, start-up and cryptocurrency sectors.

These lenders have been seized by US authorities and placed under receivership.

SVB and Signature Bank became the second and third-biggest banking failures yet in the US, trailing Washington Mutual, which folded in 2008.

A fourth US lender, First Republic Bank, is at risk after a volatile week of trading when its stock price swung wildly after the collapses of SVB, Signature and Silvergate.

Eleven major US banks, however, came to its rescue, announcing $30 billion in deposits to help shore up the troubled financial institution. Those banks included JP Morgan, Bank of America, Citigroup and Wells Fargo, which each contributed $5 billion of uninsured deposits.

A full merger between UBS and Credit Suisse will create one of the biggest financial institutions in the world. UBS has about $1.1 trillion in assets, while Credit Suisse has about $575 billion.

FT reported on Saturday that US investment major BlackRock was assembling a bid to buy Credit Suisse. BlackRock denied the report.

A full merger between UBS and Credit Suisse would create one of the biggest financial institutions in Europe and globally. AFP

UBS has insisted on a change that voids the deal if its credit default spreads jump by 100 basis points or more, sources told FT.

The US Federal Reserve has also given its assent to the deal progressing, they said.

The Swiss central bank announced it was throwing a $54 billion lifeline to Credit Suisse on Thursday in the first such move from a central bank since the 2008 crisis.

On Saturday night, the Swiss Cabinet met in the Finance Ministry in Bern for a series of presentations from government officials, the SNB, Finma, and representatives of the banking sector, FT reported.

The government is preparing emergency measures to fast-track the takeover and plans to introduce legislation that will bypass the normal six-week consultation period required for UBS shareholders so the deal can be sealed immediately, the sources told FT.

“The framework of the deal has been designed by Swiss regulators to provide maximum stability to the country’s banking system,” they said.

UBS will dramatically shrink Credit Suisse’s investment bank, so that the combined entity will make up no more than a third of the merged group, FT reported.

But the current term sheet for the deal does not specify what will happen to Credit Suisse’s individual business divisions, and simply outlines a 100 per cent takeover of the group.

Switzerland's largest bank, UBS, has agreed to buy Credit Suisse. AFP
Updated: March 20, 2023, 3:13 AM