March 18, 2023 | 7:06 p.m.
UBS is reportedly closing a deal to take over beleaguered Credit Suisse.
Bloomberg via Getty Images
Swiss bank UBS Group is set to strike a deal to take over rival Credit Suisse during a weekend of frantic negotiations, according to multiple reports.
The Swiss government and other global authorities, including some in the US, are working to seal the deal on Sunday in hopes of bolstering confidence in the banking system ahead of Monday’s market open.
The scramble to seal the deal is playing out after the Swiss National Bank and the country’s main regulator, Finma, told their international counterparts that they see a deal with UBS as the only option to prevent Credit Suisse from s collapse, reported the Financial Times.
It will be the first combination of two global systemically important banks since the 2008-2009 financial crisis, according to Bloomberg News.
A full merger would create one of Europe’s largest financial institutions.
Switzerland is preparing to use emergency measures to speed up the deal, the FT said.
The country’s regulators have proposed waiving rules that usually require six weeks’ notice and shareholder vote on a takeover, so the sale can be completed quickly.
The 167-year-old Credit Suisse secured more than $50 billion from the Swiss National Bank this week amid mounting concerns over its solvency following the shock to the banking system generated by the collapse of the Silicon Valley Bank, based in California.
But that infusion did not stop investors selling the bank’s shares or slow depositors who were withdrawing money from accounts at a rate of $10.8 billion a day, the FT reported.
The lingering panic forced the Swiss National Bank and the country’s financial regulator to stage weekend talks over the potential takeover by UBS, which, with $1.1 trillion in assets, is roughly twice the size of Credit Suisse, reported the Wall Street Journal.
UBS is asking the Swiss government to cover around $6 billion in costs related to a potential takeover, Reuters reported. This would cover both expenses associated with winding down some of the troubled bank’s operations and legal fees.
Exactly how the sale will be worked out is still up in the air. It’s possible that UBS could take over all of Credit Suisse, but reports indicate that the fate of its huge retail bank is one question – and its troubled investment bank another.
UBS, which reported a profit of $7.6 billion in 2022, is set to win Credit Suisse’s wealth management business, which will come with high-priced clients in Asia and the Middle East.
Credit Suisse posted a loss of $7.9 billion last year.
Credit Suisse had approximately 50,000 employees at the end of 2022, including more than 16,000 in Switzerland.
Its global operations include an investment banking unit in New York and an operations center near Raleigh, North Carolina.
UBS has approximately 74,000 employees worldwide.
Up to 10,000 jobs could be lost if the two banks merge, but it was unclear which divisions of the banks could be hit by cuts.
Credit Suisse announced a plan to cut 9,000 jobs last year as it struggled to reorganise.
There’s still a chance the deal won’t materialize, and other financial players would also be in on it, the Journal reported.
With post wires