UBS will buy Credit Suisse to stop the banking crisis

() — Switzerland’s largest bank, UBS, has agreed to buy its ailing rival Credit Suisse in an emergency bailout deal aimed at stemming the panic in financial markets sparked by the collapse of two US banks earlier this month.

“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. “This acquisition was made possible thanks to the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority and the Swiss National Bank,” the central bank added.

He noted that the bailout would “ensure financial stability and protect the Swiss economy.”

Credit Suisse had been losing the trust of investors and customers for years. In 2022, it posted its worst loss since the global financial crisis. But confidence collapsed last week after he acknowledged “material weakness” in his accounting amid the collapse of Silicon Valley Bank and Signature Bank, raising fears in weaker institutions at a time when high interest rates have undermined the value of some financial assets.

Shares of the 167-year-old bank fell 25% for the week, money poured out of mutual funds it manages and, at one point, account holders withdrew more than $10 billion of deposits a day, reported the Financial Times. An emergency loan from the Swiss National Bank failed to stop the bleeding.

Desperate to prevent the collapse from spreading through the global financial system on Monday, Swiss authorities had pushed for a private sector bailout, while reportedly considering Plan B: full or partial nationalization.

The emergency takeover was agreed after days of frantic negotiations between financial regulators in Switzerland, the United States and the United Kingdom. UBS and Credit Suisse are among the top 30 banks in the global financial system and together have nearly $1.7 trillion in assets.

The global headquarters of UBS and Credit Suisse are just 300 meters apart in Zurich, but the banks’ fortunes have been on very different paths recently. UBS shares have risen 15% in the past two years and it posted a $7.6 billion profit in 2022. It had a market value of about $65 billion on Friday, according to Refinitiv.

Credit Suisse shares have lost 84% of their value over the same period, posting a loss of $7.9 billion last year. It was worth just $8 billion at the end of last week.

Dating back to 1856, Credit Suisse traces its roots to the Schweizerische Kreditanstalt, which was created to finance the expansion of the railway network and the industrialization of Switzerland.

In addition to being the second largest bank in Switzerland, it looks after the wealth of many of the world’s richest people and offers global investment banking services. It had more than 50,000 employees at the end of 2022.