Banking Giant UBS to Acquire Credit Suisse for Approximately $3.25 Billion in an Attempt to Quell Financial Chaos
In an effort to avoid more chaos within the international banking system, financial behemoth UBS is set to acquire troubled rival Credit Suisse for a staggering $3.25 billion. This ambitious takeover, brokered by Swiss authorities, comes amid a wave of concerns about the stability of banks following the collapse of a couple of US banks and the subsequent industry-wide uncertainty.
Credit Suisse, one of the 30 banks deemed systemically important worldwide, has been in a precarious position after attempts to secure a massive 50 billion francs ($54 billion) loan failed to reassure investors and consumers alike. Consequently, shares of Credit Suisse and other banks plummeted earlier today, raising alarms about possible instability within the worldwide financial system.
The Swiss government, acting swiftly, promoted UBS to step up and rescue its smaller competitor. Announcing the deal on Sunday night, Swiss President Alain Berset stated, "The acquisition among great breadth for the stability of global finance." He further noted that an unchecked collapse of Credit Suisse would have incalculable consequences for the Swiss economy and the global financial system as a whole.
The ease of the merger was facilitated by an emergency statute passed by Switzerland's executive branch, a seven-member regulatory body, which allowed the deal to go through without needing shareholder approval. Credit Suisse Chairman Axel Lehmann referred to the sale as a "clear transition."
In the aftermath of the Swiss deal, global central banks announced coordinated economic transfers to support financial institutions in the coming weeks. This includes daily access to a lending center for banks striving to borrow US dollars, a technique widely used during the 2008 financial crisis. By March 2020, such swap lines had been tapped for $580 billion.
Max Georgiou, an analyst at Third Bridge, stated, "Today is one of the most significant days in European finance since 2008, with far-reaching consequences for the sector." With potential repercussions reaching beyond European banking to the wealth management industry, the acquisition of Credit Suisse by UBS may significantly alter the course of the financial sector.
Sources:- UBS to buy Credit Suisse for $3.25 billion (https://www.cnbc.com/2023/03/19/ubs-to-buy-credit-suisse-for-3point25-billion.html)- Swiss Central Bank Reveals Capital Injection Plan to Support Banks (https://www.bloombergquint.com/world/swiss-central-bank-reveals-capital-injection-plan-to-support-banks)- European Central Bank ready to act if needed amid Credit Suisse turbulence (https://www.reuters.com/world/europe/european-central-bank-ready-act-if-needed-amid-credit-suisse-turbulence-2023-03-18/)- Switzerland to provide over 100 billion francs in aid, financial backstops for Credit Suisse deal (https://www.reuters.com/business/finance/switzerland-provide-over-100-billion-francs-aid-financial-backstops-credit-suisse-deal-2023-03-19/)- UBS plans to sell pieces of Credit Suisse or shrink its size (https://www.cnbc.com/2023/03/20/ubs-plans-to-sell-pieces-of-credit-suisse-or-shrink-its-size.html)
Last Updated: 20 March 2023
The acquisition of Credit Suisse by UBS, a move aimed at preserving the stability of global finance, is expected to have far-reaching consequences within the business and general-news sectors. The spectacular downfall of Credit Suisse, one of the 30 banks considered systemically important worldwide, has raised alarms about the health of banks globally and could significantly alter the course of the finance industry.
