London (CNN) Switzerland’s largest bank, UBS, has agreed to buy its ailing rival Credit Suisse in an emergency bailout deal to defuse financial market panic sparked by the failure of two US banks earlier this month.
“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. “This acquisition has been made possible with the support of the Swiss Federal Government, the Swiss Financial Market Supervisory Authority and the Swiss National Bank,” the central bank added.
It said the rescue would “ensure financial stability and protect the Swiss economy”.
Swiss credit (CS) lost the trust of investors and customers for years. In 2022, it posted its biggest loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its accounting and as the demise of Silicon Valley Bank and Signature Bank spread fear to weaker institutions at a time when rising interest rates have undermined the value of some financial assets.
Shares of the 167-year-old bank fell 25% over the week, money was pouring out of investment funds it managed and at one point account holders were taking deposits of more than $10 billion a day, the Financial Times reported. An emergency loan from the Swiss National Bank failed to stop the bleeding.
Desperate to prevent the collapse from spreading across the global financial system on Monday, Swiss authorities had been pushing hard for a private sector bailout while reportedly considering plan B — full or partial nationalization.
The emergency takeover was approved after days of frantic negotiations with financial regulators in Switzerland, the United States and the United Kingdom. UBS (UBS) and Credit Suisse are among the top 30 banks in the global financial system, and together they have nearly $1.7 trillion in assets.
The global headquarters of UBS and Credit Suisse are only 300 meters apart in Zurich, but the fortunes of the banks have taken very different paths recently. Shares of UBS are up 15% over the past two years and posted a profit of $7.6 billion by 2022. According to Refinitiv, it had a market capitalization of about $65 billion as of Friday.
Credit Suisse stock has lost 84% of its value over the same period, posting a loss of $7.9 billion last year. At the end of last week, it was worth just $8 billion.
Credit Suisse dates back to 1856 and has its roots in the Schweizerische Kreditanstalt (SKA), which was established to finance the expansion of Switzerland’s rail network and industrialization.
In addition to being Switzerland’s second largest bank, it looks after the wealth of many of the world’s richest people and offers global investment banking services. At the end of 2022, it employed more than 50,000 workers.
This is a developing story and will be updated.
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