Chairman Axel Lehmann mentioned the merger represents the “greatest accessible end result.”
Bern, Switzerland:
UBS will take over its troubled Swiss rival Credit Suisse for $3.25 billion following crunch talks Sunday geared toward stopping the stricken financial institution from triggering a wider worldwide banking disaster.
The authorities mentioned the deal involving Switzerland’s greatest financial institution taking up the second-largest, was important to stop irreparable financial turmoil spreading all through the nation and past.
The transfer was welcomed in Washington, Brussels and London as one that might help monetary stability.
After a dramatic day of talks on the finance ministry within the capital Bern — and with the clock ticking forward of the markets opening on Monday in Asia after which in Europe — the takeover particulars have been introduced at a press convention.
Swiss President Alain Berset was flanked by UBS chairman Colm Kelleher and his Credit Suisse counterpart Axel Lehmann, together with the Swiss finance minister and the heads of the Swiss National Bank (SNB) central financial institution and the monetary regulator FINMA.
The rich Alpine nation is famed for its banking prominence and Berset mentioned the takeover was the “greatest answer for restoring the arrogance that has been missing within the monetary markets lately”.
If Credit Suisse went into freefall, it will have had “incalculable penalties for the nation and for worldwide monetary stability”, he mentioned.
Credit Suisse mentioned in a press release that UBS would take it over for “a merger consideration of three billion Swiss francs ($3.25 billion)”, with Credit Suisse shareholders receiving one UBS share for 22.48 Credit Suisse shares.
“Given current extraordinary and unprecedented circumstances, the introduced merger represents the very best accessible end result,” Lehmann mentioned.
‘Huge collateral harm’ danger
Finance Minister Karin Keller-Sutter mentioned that chapter for Credit Suisse may have brought about “irreparable financial turmoil” and “large collateral harm” for the Swiss monetary market, to not point out the “danger of contagion” for different banks, together with UBS itself.
The takeover has “laid the inspiration for higher stability each in Switzerland and internationally”, she mentioned.
The deal was warmly acquired internationally, with European Central Bank chief Christine Lagarde welcoming the “swift motion”.
The choices taken in Bern “are instrumental for restoring orderly market situations and guaranteeing monetary stability. The euro space banking sector is resilient, with robust capital and liquidity positions”, she mentioned.
Fed chair Jerome Powell and Treasury Secretary Janet Yellen mentioned in a joint assertion: “We welcome the bulletins by the Swiss authorities at the moment to help monetary stability.”
Britain too mentioned the deal would “help monetary stability”.
Keller-Sutter mentioned her US and British colleagues “actually feared that there could possibly be a chapter of Credit Suisse, with all of the losses”.
The SNB introduced that 100 billion Swiss francs of liquidity can be accessible.
Keller-Sutter insisted the deal was “a business answer and never a bailout.”
UBS chairman Kelleher added: “We are dedicated to creating this deal an amazing success.
“This is totally important to the monetary construction of Switzerland.
“UBS will stay rock stable,” he insisted.
Too large to fail?
Like UBS, Credit Suisse was considered one of 30 banks world wide deemed to be Global Systemically Important Banks — of such significance to the worldwide banking system that they’re thought-about too large to fail.
But the market motion appeared to counsel the financial institution was being perceived as a weak hyperlink within the chain.
Amid fears of contagion after the collapse of two US banks, Credit Suisse’s share worth had plunged by greater than 30 p.c on Wednesday to a brand new document low of 1.55 Swiss francs. That noticed the SNB step in in a single day with a $54-billion lifeline.
After recovering some floor Thursday, its shares closed down eight p.c on Friday at 1.86 Swiss francs because the Zurich-based lender struggled to retain investor confidence.
In 2022, the financial institution suffered a web lack of $7.9 billion and expects a “substantial” pre-tax loss this yr.
A UBS assertion mentioned Credit Suisse shareholders would get 0.76 Swiss francs per share.
After struggling heavy falls on the inventory market final week, Credit Suisse’s share worth closed Friday at 1.86 Swiss francs, with the financial institution value simply over $8.7 billion.
Credit Suisse’s share worth has tumbled from 12.78 Swiss francs in February 2021 on account of a string of scandals that it has been unable to shake off.
The Swiss Bank Employees Association mentioned there was “an amazing deal at stake” for the 17,000 Credit Suisse workers, “and subsequently additionally for our financial system”.
In addition, tens of 1000’s of jobs exterior of the banking business have been doubtlessly be in danger, it added.
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