UBS has agreed to take over its troubled Swiss rival Credit Suisse after doubling its supply to $2 billion, the Financial Times reported amid pressing talks on March 19, 2023 geared toward sparing the embattled financial institution from a massacre when the markets reopen.
The two largest banks within the rich Alpine nation famed for its banking prominence have been in negotiations all through the weekend, with the federal government, the central financial institution and monetary regulators all concerned.
The Financial Times newspaper, which was the primary on March 17 to report the prospect of Switzerland’s greatest financial institution swallowing up Credit Suisse, mentioned UBS had agreed to buy it for $2 billion, with its fellow Zurich-based lender having spurned an earlier supply of $1 billion.
The FT mentioned shareholders would get 0.50 Swiss francs ($0.54) per share, with the deal to be completed on March 19 earlier than the markets open in Asia.
After struggling heavy falls on the inventory market final week, Credit Suisse’s share value closed on March 17 at 1.86 Swiss francs, with the financial institution price simply over $8.7 billion.
Credit Suisse’s share value has tumbled from 12.78 Swiss francs in February 2021 due to a string of scandals that it has been unable to shake off.
UBS was being urged by the authorities to get a deal over the road earlier than the inventory change reopens at 8 a.m. GMT (1.30 p.m. IST) on March 20, in a bid to reassure buyers and keep away from a wave of contagious panic on the markets.
The Swiss authorities felt that they had no alternative however to push UBS into overcoming its reluctance, due to the large stress exerted by Switzerland’s main financial and monetary companions, fearing for their very own monetary centres, mentioned Blick newspaper.
A merger of this scale— involving swallowing up all or a part of a financial institution arousing rising investor unease — would usually take months.
While beneath Swiss guidelines, UBS would usually have to seek the advice of shareholders over six weeks, it may use emergency measures to skip the session interval and a shareholder vote, the FT mentioned, citing unnamed sources.
The 20 Minuten newspaper filmed members of the Swiss authorities, together with President Alain Berset, heading into the finance ministry in Bern early Sunday.
The authorities didn’t reply when contacted by AFP on March 19.
The central financial institution chief, Swiss National Bank chairman Thomas Jordan, was seen by AFP leaving the Finance Ministry.
Credit Suisse, the SNB and the Swiss monetary watchdog FINMA all declined to touch upon the negotiations when contacted by AFP.
The SonntagsZeitung newspaper referred to as it “the merger of the century”.
“The unthinkable becomes true: Credit Suisse is about to be taken over by UBS,” the weekly mentioned.
The authorities, FINMA and the SNB “see no other option”, it claimed. “The pressure from abroad had become too great — and the fear that the reeling Credit Suisse could trigger a global financial crisis,” it mentioned.
David Benamou, chief funding officer of Paris-based Axiom Alternative Investments, mentioned: “The Credit Suisse management, even if forced to do so by the authorities, would only choose (a UBS takeover) if they have no other solution.”
The Swiss Bank Employees Association mentioned there was “a great deal at stake” for the 17,000 Credit Suisse workers, “and therefore also for our economy”.
“In addition, tens of thousands of jobs outside of the banking industry would potentially be at risk,” it added, calling for a job power to be established to handle the state of affairs.
Like UBS, Credit Suisse is one in every of 30 banks all over the world deemed to be Global Systemically Important Banks — of such significance to the worldwide banking system that they’re thought of too massive to fail.
But the market motion appeared to counsel the financial institution was being perceived as a weak hyperlink within 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.
Amid fears of contagion after the collapse of two U.S. banks, Credit Suisse’s share value plunged by greater than 30% on Wednesday to a brand new file low of 1.55 Swiss francs. That noticed the SNB step in in a single day with a $54-billion lifeline.
After recovering some floor on March 16, its shares closed down eight p.c on March 17 at 1.86 Swiss francs because the Zurich-based lender struggled to retain investor confidence.
In 2022, the financial institution suffered a web lack of $7.9 billion and expects a “substantial” pre-tax loss this yr.
