UBS Group (NYSE:UBS) and Credit Suisse Group are in advanced talks to form a merger, which would be the most significant banking merger in Europe since the 2008 Great Recession. The deal could be reached as soon as Sunday, and involves UBS taking over Credit Suisse to obtain its wealth and asset management units, while possibly divesting the investment banking division. UBS has conditions related to any deal, including being in a position to phase in any further demands on global capital rules for systemically relevant institutions, and requesting indemnities or agreements from the Swiss government related to potential legal costs.
The potential takeover of Credit Suisse comes after the failure of two banks in the US – Silicon Valley Bank and Signature Bank – which raised fears over the stability of the banking system. Credit Suisse is one of 30 banks worldwide deemed too big to fail because they are of such importance to the international banking system.[0]
In addition, Credit Suisse has been in the midst of a strategic overhaul to restore stability and profitability, and has faced various scandals and controversies over recent years, including the fallout from its involvement with the collapsed supply chain finance firm, Greensill Capital, which led to $1.7 billion in losses.[1]
UBS and Credit Suisse’s boards are meeting this weekend to weigh the idea, which is being orchestrated by the Swiss regulators.[2] American investment company BlackRock has denied that it is participating in any plans to acquire Credit Suisse.[3]
The outcome of the takeover talks could have major implications for the global banking sector, as well as for Swiss retail banking in Switzerland. UBS is reportedly asking the Swiss government to take on certain legal costs and potential future losses in any deal. Both UBS and Credit Suisse are opposed to a forced combination, but the government could still combine their operations.[4]
0. “Credit Suisse bank: UBS said to be in takeover talks with troubled rival” BBC, 19 Mar. 2023, https://www.bbc.com/news/business-65004605
1. “BlackRock denies report that it’s preparing a takeover bid for Credit Suisse” CNBC, 18 Mar. 2023, https://www.cnbc.com/2023/03/18/blackrock-is-working-on-a-rival-takeover-bid-for-credit-suisse-financial-times-reports.html
2. “UBS is considering buying troubled Credit Suisse in what would be just the latest banking upheaval since the industry’s recent tumble into chaos” Fortune, 17 Mar. 2023, https://fortune.com/2023/03/17/ubs-credit-suisse-talks-acquisition-banking/
3. “Switzerland preparing emergency measures for UBS’ takeover of Credit Suisse: Report” Cointelegraph, 19 Mar. 2023, https://cointelegraph.com/news/switzerland-preparing-emergency-measures-for-ubs-takeover-of-credit-suisse-report
4. “UBS said to be in talks to take over embattled lender Credit Suisse (NYSE:CS)” Seeking Alpha, 17 Mar. 2023, https://seekingalpha.com/news/3948655-ubs-said-to-be-in-talks-to-take-over-embattled-lender-credit-suisse