Another global level banking giant fall into graves after the death of Silicon Valley Bank (SVB)
Crisis-hit Credit Suisse hard. The bank was struggling to regain market confidence for a long time and eventually its stock plunged 31% on March 15, 2023 amid doubts over its financial stability.
Credit Suisse is one of the largest wealth managers in the world. It is amongst the ‘top 30 globally systemically important banks’. Overall the bank could be considered “too big to fail”. And that is why Swiss Government made all the efforts to prevent further erosion of confidence in the banking system.
The largest Swiss bank – UBS Group AG agreed to take over its biggest rival Credit Suisse Group AG (the second largest Swiss Bank) for more than $3 billion. It is considered to be the biggest banking deal in recent years by regulators.
The Swiss government is to provide around $9 billion to backstop any losses to UBS due to the mega-deal. The Swiss National Bank (SNB) also agreed to provide approx. $100 billion of liquidity to UBS to help facilitate the deal.
The recent acquisition of Credit Suisse by UBS has sent shockwaves through the world of finance. This deal, valued at $3.2 billion, has raised many questions about the stability of Switzerland’s banking industry and the future of both companies involved.
The acquisition was prompted by Swiss regulators looking to safeguard financial stability and protect the Swiss economy. Credit Suisse was valued at about 7.4 billion francs on Friday, with UBS offering a fraction of that amount for the takeover.
The Swiss National Bank will offer 100 billion-franc liquidity assistance to UBS, and the government is granting a 9 billion franc guarantee for potential losses from assets UBS is taking over. Regulator Finma has said that about 16 billion francs of bonds will become worthless to ensure private investors help shoulder the costs.
Despite assurances from both UBS and Credit Suisse that the takeover was a “commercial solution and not a bailout,” job concerns have been raised in light of the merger, with fears that tens of thousands of jobs could be at risk. The combined bank will have $5 trillion of invested assets, making it one of the largest banks in the world.
The crisis in Credit Suisse has been brewing for some time, with the bank struggling to keep up with its competitors in the wake of several high-profile scandals. In 2019, the bank was fined $135 million by U.S. regulators for its role in a bond-rigging scheme.
This was followed by another scandal involving the bank’s supply chain finance funds, which led to billions of dollars in losses.
The acquisition of Credit Suisse by UBS is seen by many as a necessary move to stabilize the Swiss banking industry, which has been hit hard by several crises in recent years. However, the long-term effects of this merger remain to be seen, and many are calling for greater transparency and accountability from both banks.
In conclusion, the acquisition of Credit Suisse by UBS is a significant event in the world of finance, with far-reaching consequences for both companies and the Swiss banking industry as a whole.
While the deal may provide some much-needed stability in the short term, it is clear that greater scrutiny and accountability will be necessary to prevent future crises from occurring.
