SWITZERLAND: Struggling bank Credit Suisse has been rescued by its Swiss competitor UBS in a deal backed by the government.
Sunday’s announcement followed a weekend of emergency talks held in Switzerland between the two banks and the nation’s financial regulators.
The deal, as per the Swiss National Bank, was the most effective method to manage risks to the economy and regain the trust of financial markets.
“We are fully focused on ensuring a smooth transition and seamless experience for our valued clients and customers,” a spokesman from the bank told the press.
Shareholders of Credit Suisse were not allowed to vote on the transaction, and they will receive one share of UBS for every 22.48 shares they currently own, pricing the bank at $3.15 billion (£2.6 billion).
At Friday’s business closing, Credit Suisse was worth about $8 billion.
However, the agreement accomplished what the authorities aimed to do, which was secure a result prior to Monday’s opening of the financial markets.
“A solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the central bank of Switzerland stated in a statement.
The federal government declared that it would provide a $9.6 billion guarantee against possible losses to UBS in order to lessen any risks for the bank.
Additionally, the Swiss central bank has extended a $110 billion liquidity aid offer. Global financial organizations praised the deal without delay.
The “comprehensive set of actions” outlined by the Swiss authorities were praised by the Bank of England. Throughout the planning for today’s announcements, “we have been working closely with international counterparts and will continue to support their implementation.”
It also stated that the UK banking system, which was “capitalized and funded,” still “remains safe and sound.”
The Bank of England and the Financial Conduct Authority (FCA) will continue to interact with the British government “as usual,” according to the UK Treasury, which also expressed support for the merger.
The FCA declared on Sunday that it was “minded to approve” the takeover in order to support financial stability because both Credit Suisse and UBS have operations in London.
The watchdog said, “The FCA continues to interact closely with UK and international regulatory partners to monitor market developments.”
The head of the European Central Bank, Christine Lagarde, expressed her appreciation for the “swift action” of the Swiss officials. The European Central Bank president’s remarks were mirrored in the United States.
Both Jerome Powell, chairman of the Federal Reserve Board, and Janet Yellen, Treasury Secretary, said that the Swiss government’s announcement supported “financial stability.”
Colm Kelleher, chairman of UBS, said Credit Suisse was a “very fine asset we are determined to keep” in a statement made in Bern, Switzerland, following the announcement made on Sunday night.
The weekend agreement comes after the Swiss National Bank’s emergency $54 billion lifeline on Wednesday failed to calm the markets, and Credit Suisse shares fell 24%, sparking a larger sell-off on European stock markets.
The 167-year-old bank is losing money and has experienced a number of issues recently, including accusations of money fraud.
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