Business

UBS agrees to buy banking rival Credit Suisse in emergency rescue

by Stephen Neukam - 03/19/23 4:03 PM ET

FILE – Grey clouds cover the sky over a building of the Credit Suisse bank in Zurich, Switzerland, Feb. 21, 2022. Swiss regulators have found that Credit Suisse made a “serious breach” of law in connection with a now-bankrupt firm linked to Australian financier Lex Greensill and have opened a probe that could lead to penalties against four former bank managers. Switzerland’s financial markets authority, FINMA, said Tuesday that it has concluded enforcement proceedings opened two years ago against Credit Suisse after bank partner Greensill Capital went bankrupt. (Ennio Leanza/Keystone via AP, File)

The floundering Credit Suisse bank is set to be acquired by its rival UBS, the largest bank in Switzerland, in an emergency purchase meant to stave off a wider crisis in the global banking system.

The $3.2 billion takeover of Credit Suisse by UBS was arranged quickly, with officials looking to finalize the arrangement before markets opened on Monday.

“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss National Bank said in a statement Sunday.

UBS will also be able to access a loan of up to $108 billion from the Swiss National Bank, according to the statement.

Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell said in a joint statement Sunday that they “welcome” the move.

“We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation,” Yellen and Powell said.

The two banks’ discussions were initiated and supported by the Swiss Federal Department of Finance, Swiss regulator Finma and the Swiss National Bank, according to UBS.

UBS Chairman Colm Kelleher said in a statement that “this acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue.”

The takeover of Credit Suisse comes as the bank was rocked by uncertainty in the financial sector resulting from the historic fall of Silicon Valley Bank in the U.S. earlier this month. After the California-based firm collapsed, a number of other banks, including those in other countries, faced shocks to their stock prices as investors and depositors lost confidence in some mid-sized banks.

U.S. officials stepped in to backstop all uninsured deposits at Silicon Valley Bank, going far beyond the $250,000 insurance guarantee offered by the Federal Deposit Insurance Corporation. But the moves to bolster consumer confidence has not completely curbed concerns of a broader banking crisis.

The failure of Credit Suisse comes after the Swiss National Bank last week offered it a lifeline of $54 billion. But that did not save the bank from persistent problems that had been accentuated by broader global banking issues. The bank recorded its worst losses since the 2008 financial crisis last year.

Updated 4:53 p.m.

Tags banking crisis Silicon Valley Bank Switzerland