UBS Group (NYSE:UBS) is reportedly nearing the acquisition of Credit Suisse (NYSE:CS) in a move that could be the most significant banking merger in Europe since the 2008 Great Recession.[0] According to the Financial Times, Swiss National Bank and Swiss regulators have seen the merger as their “plan A” to restore confidence in the country’s banking sector.[1]
UBS is proposing to pay up to $1 billion for the troubled Swiss rival, with a number of conditions attached.[2] UBS has requested a phased approach to meeting global capital requirements, as well as indemnities or agreements from the Swiss government related to potential legal costs.[3] UBS has also asked for backstops and guarantees from Swiss regulators, as well as a clause that would void a deal if the markets deem it too risky.[1]
Credit Suisse is reportedly balking at the offer, arguing it is too low and would hurt shareholders and employees.[1] American investment company BlackRock stated in a tweet that it has “no interest” in acquiring Credit Suisse.[4]
The rescue of Credit Suisse would cap years of turmoil at the 167-year-old bank, which has been dogged by a string of scandals and multi-billion dollar losses.[5] A successful merger between the two Swiss banks would reportedly create one of the biggest global systemically important financial institutions in Europe.[4]
The Bank of England and UBS have declined to comment, while Credit Suisse has been contacted for comment.[6] The news comes at a particularly precarious time for the global banking sector, with the failure of Silicon Valley Bank and Signature Bank in the US, as well as the “material weakness” in Credit Suisse’s financial reporting.[7]
Credit Suisse is deemed to be one of the 30 global banks that are systemically important, or too big to fail.[5] With 5,000 people employed in the UK, the fate of the bank is of particular importance to the international banking system.[8]
0. “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
1. “UBS offers up to $1 billion to rescue Credit Suisse: report” Business Insider, 19 Mar. 2023, https://www.businessinsider.com/credit-suisse-ubs-offers-up-to-billion-rescue-deal-report-2023-3
2. “Credit Suisse: Bank of England won’t object to takeover as UBS considers $1bn bid” The Guardian, 19 Mar. 2023, https://www.theguardian.com/business/2023/mar/19/credit-suisse-bank-of-england-wont-object-to-takeover-as-ubs-considers-1bn-bid
3. “A Possible Historic Deal in the Works” finews.com, 19 Mar. 2023, https://www.finews.com/news/english-news/56312-ubs-credit-suisse-snb-finma-historic-deal-merger
4. “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
5. “Future of Credit Suisse hangs in the balance as efforts intensify to rescue stricken bank” Daily Mail, 18 Mar. 2023, https://www.dailymail.co.uk/news/article-11876895/Future-Credit-Suisse-hangs-balance-efforts-intensify-rescue-stricken-bank.html
6. “UBS and regulators rush to seal Credit Suisse takeover deal possibly by Sunday: reports” MarketWatch, 18 Mar. 2023, https://www.marketwatch.com/story/ubs-and-regulators-rush-to-seal-credit-suisse-takeover-deal-reports-2f4ccfbc
7. “Credit Suisse bank: UBS is in talks to take over its troubled rival” BBC, 19 Mar. 2023, https://www.bbc.com/news/business-65004605
8. “UK regulators back merger of banking giants Credit Suisse and UBS” Sky News, 19 Mar. 2023, https://news.sky.com/story/uk-regulators-back-merger-of-banking-giants-credit-suisse-and-ubs-12837876