Struggling Credit Suisse has been rescued by its Swiss rival, UBS, in a deal backed by the Swiss government.
The two banks, along with financial regulators, held emergency talks over the weekend to finalize the agreement. The Swiss National Bank endorsed the deal, believing it to be the best way to restore market confidence and manage economic risks. Credit Suisse assured its clients that there would be no interruption to their services. Shareholders of Credit Suisse will not be allowed to vote on the deal, but will instead receive one share in UBS for every 22.48 shares they own, valuing the bank at £2.6bn. This represents a significant drop in value from the approximately £8bn it was worth at the close of business on Friday.
The merger comes amidst fears over the stability of the global banking system, with Credit Suisse being the latest casualty of a crisis of confidence that has seen two mid-sized US banks fail and another requiring emergency funding. The Swiss central bank described the deal as a solution to secure financial stability and protect the Swiss economy in this exceptional situation. To reduce risks for UBS, the federal government has pledged a guarantee of $9.6bn against potential losses, while the Swiss central bank has offered liquidity assistance of up to $110bn.
Although the deal has received praise from financial institutions worldwide, it has also raised concerns about the concentration of power in the Swiss banking sector. Additionally, the acquisition of Credit Suisse by UBS, which itself only recently recovered from a crisis of confidence, may pose challenges for the merged entity in the long run.
Source: BBC
