UBS was up in opposition to the clock Sunday in talks to finalise a mammoth takeover of its troubled rival Swiss financial institution Credit Suisse and reassure buyers earlier than the markets reopen.
Switzerland’s largest financial institution UBS is being urged by the authorities to get a deal over the line in a bid to keep away from a wave of contagious panic on the markets Monday, in line with a number of media stories.
The rich Alpine nation’s largest banks have been in pressing negotiations all through the weekend, with the authorities, central financial institution and monetary regulators all concerned.
The 20 Minuten newspaper filmed members of the Swiss authorities, together with President Alain Berset, heading into the finance ministry in Bern early Sunday, with the Swiss information company ATS reporting that the constructing’s window shutters had been lowered.
Blick newspaper mentioned UBS will purchase Credit Suisse in a deal to be sealed later Sunday in Bern at a gathering that includes the authorities and the banks’ executives.
A merger of this scale — involving swallowing up all or a part of a financial institution arousing rising investor unease — would usually take months. UBS can have had just a few days.
However, the Swiss authorities felt they’d no selection however to push UBS into overcoming its reluctance, as a consequence of the huge strain exerted by Switzerland’s main financial and monetary companions, fearing for their very own monetary centres, mentioned Blick.
“When the inventory market opens on Monday, Credit Suisse could possibly be a factor of the previous,” the tabloid said.
While under Swiss rules, UBS would typically have to consult shareholders over six weeks, it could use emergency measures to skip the consultation period and a shareholder vote, the Financial Times newspaper said, citing unnamed sources.
UBS would require public guarantees to cover legal costs and potential losses, according to a report by Bloomberg, citing anonymous sources.
‘Merger of the century’
Credit Suisse, the country’s SNB central bank and the Swiss financial watchdog FINMA all declined to comment on the negotiations when contacted by AFP.
The government did not immediately respond when contacted by AFP Sunday.
The SonntagsZeitung newspaper called it “the merger of the century”.
“The unthinkable turns into true: Credit Suisse is about to be taken over by UBS,” the weekly said.
The government, FINMA and the SNB “see no other option”, it claimed.
“The strain from overseas had turn out to be too nice — and the worry that the reeling Credit Suisse may set off a worldwide monetary disaster,” it said.
Too big to fail?
Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks — of such importance to the international banking system that they are deemed too big to fail.
But the market movement seemed to suggest the bank was being perceived as a weak link in the chain.
“We are now awaiting a definitive and structural solution to the problems of this bank,” French Finance Minister Bruno Le Maire instructed Le Parisien newspaper. “We stay extraordinarily vigilant.”
According to the FT, Credit Suisse customers withdrew 10 billion Swiss francs ($10.8 billion) in deposits in a single day late last week — a measure of how far trust in the bank has fallen.
After a turbulent week on the stock market, which forced the SNB to step in with a $54-billion lifeline, Credit Suisse was worth just over $8.7 billion by Friday evening — precious little for a bank considered one of 30 key institutions worldwide.
FINMA and the SNB said Credit Suisse “meets the capital and liquidity requirements” imposed on such banks, however distrust stays.
Stock market plunge
Amid fears of contagion after the collapse of two US banks, Credit Suisse’s share worth plunged by greater than 30 % on Wednesday to a brand new file low of 1.55 Swiss francs.
After recovering some floor on Thursday, its shares closed down eight % on Friday, at 1.86 Swiss francs as the Zurich-based lender struggled to retain investor confidence.
Credit Suisse has been stricken by a sequence of scandals in latest years. Shares had been price 12.78 Swiss francs in February 2021.
In 2022, the financial institution suffered a internet lack of $7.9 billion and expects a “substantial” pre-tax loss this year.
The notion of Switzerland’s biggest banks joining forces has cropped up over the years but has generally been dismissed due to competition issues and risks to the Swiss financial system’s stability.
“The Credit Suisse management, even if forced to do so by the authorities, would only choose (this option) if they have no other solution,” mentioned David Benamou, chief funding officer of Paris-based Axiom Alternative Investments.
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(This story has not been edited by News18 employees and is revealed from a syndicated information company feed)
