Credit Suisse, a major Swiss bank that was, until a decade ago, winning accolades as the world’s best private bank, will be bought by one of its main rivals for pennies on the dollar in a sensational rescue deal that regulators hope will bring an end to weeks of uncertainty.
The rescue deal follows intensive negotiations between the Swiss National Bank and the Swiss Government, which moved quickly to amend banking legislation to remove the need for Credit Suisse’s shareholders to sign off on the deal.
UBS, Switzerland’s biggest bank, will pay 3 billion Swiss francs (CHF) (€3.02 billion) to acquire Credit Suisse, which is around 60 per cent less than it was worth on Friday.
Credit Suisse’s share price stood at 11.52 CHF exactly two years ago, and has been declining since, standing at 3.32 CHF in early February 2023. On Friday, shares were being sold for 1.86 CHF. On Sunday, UBS bought the company for just 0.76 CHF per share in UBS stocks.
While the bank’s fortunes have suffered significantly in recent years, the spark for the crisis came last week, when its largest shareholder, the Saudi National Bank, declined to extend financial assistance to the Swiss bank.
Following the Saudi National Banks decision, the 167-year-old Credit Suisse experienced a run on deposits of up to €10 billion a day, forcing it to turn to the Swiss National Bank for an emergency of over €50 billion.
The decisive response by regulators was likely influenced by the collapse of two US banks earlier this month, which caused concern among financial analysts.
In a statement released on Sunday, the Swiss National Bank said the rescue would “secure financial stability and protect the Swiss economy.”
UBS chairman Colm Kelleher said: “This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue.”
“It is absolutely essential to the financial structure of Switzerland and … to global finance,” he said.
Credit Suisse chairman Axel Lehmann said that “given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome.”
“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”
The move was welcomed by regulators in the eurozone, the US, and the UK.
Christine Lagarde, president of the European Central Bank, said the ECB stands at the ready to help banks maintain enough cash on hand to fund their operations if the need arises.
“I welcome the swift action and the decisions taken by the Swiss authorities,” she said. “They are instrumental for restoring orderly market conditions and ensuring financial stability.”
US Treasury Secretary Janet Yellen and Federal Reserve chair Jerome Powell, in a joint statement, welcomed the announcement, saying it would “support financial stability”.
The Bank of England said: “We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation. The UK banking system is well capitalised and funded, and remains safe and sound.”
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