GENEVA (AP) — Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion, in a deal orchestrated by regulators to stave off further…
Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion, in a deal orchestrated by regulators to stave off further market-shaking turmoil in the global banking system.
Swiss authorities urged UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and the bank’s customers. Shares of Credit Suisse and other banks plunged after the failure of two banks in the U.S. raised questions about other potentially shaky global financial institutions.
Credit Suisse is among 30 financial institutions known as globally systemically important banks, and authorities worried about the fallout if it were to fail.
The deal was “one of great breadth for the stability of international finance,” Swiss President Alain Berset said as he announced it Sunday night. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
Switzerland’s executive branch, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without shareholder approval.
Markets remain jittery despite the best efforts of regulators to restore calm. Shares fell Monday in Asia, with Hong Kong’s Hang Seng index down 2.7% and Tokyo’s benchmark Nikkei 225 losing 1.2%. Bank shares in the region were lower and futures in London and Frankfurt also fell.
Credit Suisse Chairman Axel Lehmann called the sale to UBS “a clear turning point.”
“It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets,” Lehmann said, adding that the focus is now on the future and on Credit Suisse’s 50,000 employees, 17,000 in Switzerland.
Following news of the Swiss deal, the world’s central banks announced coordinated moves to stabilize banks, including access to a lending facility for banks to borrow U.S. dollars if they need them, a practice widely used during the 2008 crisis. Three months after Lehman Brothers collapsed in September of 2008, such swap lines had been tapped for $580 billion. Swap lines also were rolled out during market turmoil in the early stages of the COVID-19 pandemic.
“Today is one of the most significant days in European banking since 2008, with far-reaching repercussions for the industry,” said Max Georgiou, an analyst at Third Bridge.
