May 23, 2023

UBS claims it was forced into an unfavorable Credit Suisse rescue merger.

According to a regulatory filing, UBS Group AG (UBSG.S) was hurried into buying cross-town rival Credit Suisse Group AG (CSGN.S) in a deal it did not want as a global bank crisis exacerbated the latter’s finances and compelled regulators to take rapid action.

In a report to the Securities and Exchange Commission on Tuesday, UBS told investors that owing to “emergency circumstances,” it had less than four days to undertake due diligence.

It predicted a $17 billion damage from the takeover.

After a challenging year, Switzerland’s largest bank agreed to acquire its smaller rival.

Credit Suisse’s involvement in a succession of corporate failures frightened clients, who began withdrawing their funds, a trend that increased when bank failures in the United States fueled fears of a broader banking crisis.

The Swiss central bank offered Credit Suisse liquidity assistance on March 15 in response to a wave of deposit outflows and a significant decrease in share prices.

The following day, UBS and Credit Suisse signed a confidentiality agreement, following which the former commenced due diligence, according to the UBS filing.

On March 19, the Swiss National Bank stated that UBS will buy Credit Suisse for 3 billion Swiss francs ($3.4 billion) in stock and accept a loss of up to 5 billion francs from winding down a portion of the business.

According to the filing, the ultimate price was raised from an original 1 billion francs.

According to the statement, UBS’s interest in acquiring Credit Suisse began in October, when its ad hoc Strategy Committee of its board of directors assessed its rival’s distressed situation.

According to UBS, Credit Suisse was then witnessing deposit and net asset outflows at rates that were noticeably higher than those of the quarter ending in September.

Early in December, UBS management conducted a preliminary analysis of the effects of a Credit Suisse acquisition, which it then submitted on December 19 to the Strategy Committee.

In February, the board of directors and the Strategy Committee agreed that an acquisition was “not desirable” and suggested more research to be ready for a situation in which authorities would urge UBS to help Credit Suisse.

UBS claimed that from January through the middle of March, it conducted financial studies and evaluated prospective legal frameworks, potential corrective actions, as well as any detrimental effects on itself, in the event that authorities offered an acquisition.

According to the UBS document, Credit Suisse executives had also spoken with the government between mid-December and mid-January about their alternatives, which included a merger with UBS.

Share article