Wednesday, March 29, 2023

Switzerland accelerates UBS plan to acquire Credit Suisse

Time is money in the campaign to save Credit Suisse. as reported by financial Times This Saturday, the Swiss government is set to allow UBS to break some rules so that a merger between the country’s two biggest entities can become a reality as quickly as possible. Specifically, the executive will implement emergency measures to prevent UBS from ignoring its obligation to give shareholders a six-week consultation period.

The markets have demonstrated their ability in the past week to cause stock market collapses of entities they distrust. And Credit Suisse is in that position right now: As expected in the midst of a sea of ​​negative news, the outflow of deposits from the bank is in full swing, making it hard to stop when the wheel starts spinning. according to him feetDeposit withdrawals exceeded 10 billion euros per day at the end of last week.

Given this huge withdrawal, it becomes even more important to find a settlement before the stock market opens on Monday. Its failure could lead to a new stock market collapse at an already fragile moment for the financial system due to the fragility of US regional banks. This Saturday’s meetings have been reproduced. According to local press reports, in Bern, the country’s capital, the Swiss Federal Council held an emergency meeting on which its participants did not want to comment.

Although their Zurich headquarters are only meters apart, the two biggest Swiss lenders are on opposite paths. While UBS made more than $7 billion in 2022, Credit Suisse lost a similar amount. Its value in the stock market is unequal: 56,000 million compared to about 7,000 million. And in terms of assets, UBS has 1.1 trillion and Credit Suisse has 574,000 million.

The size of the transaction crosses Swiss borders. according to him feetRegulators in the US, UK and Switzerland are studying the legal framework for the deal. UBS is in a strong position in the deal as it takes advantage of capital rules that apply to the world’s biggest banks to bail out Credit Suisse. And fearing that Credit Suisse, after years of scandals and losses in its aftermath, is still hiding a dead man in the closet, he asks for guarantees that future legal expenses will be covered. Credit Suisse has already reserved 1,200 million for that item in 2022 alone, and according to its calculations, investigations and unresolved legal cases could double the total amount.

according to the agency reutersUBS is seeking a government guarantee of $6,000 million (5,600 million euros), and the merger would mean 10,000 layoffs.

UBS has benefited from the Credit Suisse debacle, catching many customers fleeing the bank, who have chosen it as a natural destination in times of uncertainty as it is the country’s largest entity, but also, a banking crisis that Damage to the reputation of the Swiss financial system, and threatening to create a contagion effect, could also make you a victim.

The buzz comes just two days after the Swiss National Bank agreed to loan Credit Suisse up to 50 billion euros. After the public bailout was initially interpreted by investors as a powerful lifeline that would allay fears in the short term, its main shareholder, the Saudi National Bank, threw a jug of cold water by announcing that it would no longer Will not provide more money. Its titles regained a good part of the ground lost in the session on Thursday, the day the injection of liquidity was known, but it did not take long for the doubts to return, and on Friday the new collapse of the action, 8%, which Europe and America pulled down the main stock indices in the U.S., making it clear that bank sentiment was still far from positive.

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