(WSJ) UBS has agreed to buy Credit Suisse, its beleaguered rival, the Swiss government said on Sunday, in a hastily arranged deal meant to shore up the global financial sector after a week of turmoil.
Swiss government leaders and regulators said that the deal was the most effective way of reassuring investors after Credit Suisse’s shares tumbled following the implosion of Silicon Valley Bank earlier this month.
To help support UBS, the Swiss National Bank agreed to lend up to 100 billion Swiss francs, or $108.8 billion.
And Finma, the Swiss financial regulator, said it would temporarily suspend some regulations to help UBS digest its chief competitor.
The takeover of Credit Suisse is the most consequential fallout to date from the turmoil that spread from the implosion of Silicon Valley Bank earlier this month.
But Credit Suisse’s troubles were largely of its own making, tied to years of scandals and financial missteps that have cost it billions of dollars in trading losses and legal fines.
UBS will is expected to pay just a fraction of the roughly 8.8 billion Swiss francs, or $9.5 billion, that Credit Suisse was valued at on Friday, these people said.
They cautioned that the terms are still being negotiated last minute and talks may still fall apart.
Credit Suisse clients have been withdrawing billions of dollars in the past months.
In November, the bank had warned investors in a 6-K filing of potential losses due to naked short covering.
UBS and Credit Suisse Merge to Spark Massive Unemployment
UBS is asking the Swiss government to cover about $US6 billion in costs if it were to close the deal with Credit Suisse.
The 167-year-old Credit Suisse is the biggest name involved in the turmoil unleashed by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past week.
During the collapse of SVB, we saw Wall Street banks lose more than $55 billion in just one day alone.
JPMorgan, the biggest US bank, alone saw a $22 billion tumble in its market value as its stock slid 5.41% to $130.34.
Wall Street’s Bank of America lost $16.16 billion as its share price fell 6.20% to $30.54.
Wells Fargo and Morgan Stanley saw their market capitalization drop by $10.3 billion and $6.2 billion, respectively.
The $US6 billion in government guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, two people told Reuters.
One of the sources cautioned that the talks to resolve the crisis of confidence in Credit Suisse are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine.
Swiss regulators are racing to present a solution for Credit Suisse before markets reopen on Monday, but the complexities of combining two behemoths raises the prospect that talks will last well into Sunday, said the person, who asked to remain anonymous because of the sensitivity of the situation.
Credit Suisse, UBS and the Swiss government declined to comment.
Warren Buffett and Biden Administration Officials Meet
Berkshire Hathaway’s Warren Buffett has held discussions with senior Biden administration officials about the banking crisis, a source told Reuters.
The White House and US Treasury declined to comment. Bloomberg News reported earlier that Buffett had been in touch with the administration in recent days about the regional banking crisis, Bloomberg News reported on Saturday.
The source declined to elaborate on the details of the discussions.
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