On Sunday, UBS and Credit Suisse reached an agreement to merge for 3 billion Swiss francs ($3.2 billion), with Swiss authorities playing a crucial role in the transaction as nations sought to contain a contagion that was threatening the global banking system.
According to a statement from the Swiss National Bank, the central bank collaborated with the Swiss government and the Swiss Financial Market Supervisory Authority to bring about the merger of the nation’s two biggest banks. “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 statement read.
Investors in Credit Suisse will get 1 UBS share for every 22.48 Credit Suisse shares they own under the terms of the agreement. UBS estimates that the merged bank’s invested assets will total $5 trillion.
“We are devoted to making this transaction a huge success. When asked if the bank could back out of the contract at the press conference, Kelleher responded, “There are no options in this. The financial framework of Switzerland and global finance depend entirely on this.
The Swiss National Bank promised to assist the transaction with a loan of up to 100 billion Swiss francs ($108 billion). In order to “avoid any risks for UBS,” according to a different government statement, the Swiss government also provided a guarantee to accept losses from certain assets up to 9 billion Swiss francs.
During a news conference on Sunday, Swiss Finance Minister Karin Keller-Sutter emphasized that this was a commercial solution rather than a bailout.
In the fourth quarter of 2022, Credit Suisse lost around 38% of their deposits, and it was disclosed in its postponed annual report released early last week that the withdrawals had yet to stop. It recorded a 7.3 billion Swiss franc net loss for the entire year of 2022 and anticipates another “substantial” loss in 2023.