UBS’s potential takeover of Credit Suisse: What you need to know
Switzerland-based Credit Suisse was caught in the turmoil spurred by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past week.
Multinational investment bank UBS has reportedly asked the Swiss government to cover about $6bn in costs if it was to buy rival Credit Suisse.
Authorities are scrambling to resolve a crisis of confidence in the 167-year-old Switzerland-based organisation, the most globally significant bank caught in the turmoil spurred by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past weeks.
Here is what you need to know about the potential takeover:
What is the latest with the negotiations?
- The guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges.
- UBS, which is also based in Switzerland, was reportedly under pressure from the Swiss authorities to take over its local rival to get the crisis under control. The plan could see Credit Suisse’s Swiss business spun off.
- One source, according to Reuters news agency, has cautioned that the talks are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks merge.
- Switzerland is preparing to use emergency measures to fast-track the deal, the Financial Times reported.
- US authorities are working with their Swiss counterparts to help broker a deal, Bloomberg News reported.
- According to Swiss newspaper Blick, UBS will buy Credit Suisse in a deal to be sealed on Sunday during an exceptional meeting in Bern, bringing together the Swiss government and the banks’ executives.
- There were multiple reports of interest in Credit Suisse from other rivals as well. Bloomberg reported that Deutsche Bank was considering buying some of its assets.
Why is Credit Suisse in crisis?
- Credit Suisse shares lost a quarter of their value in the last week.
- The bank was forced to tap $54bn in central bank funding as it tries to recover from a string of scandals that undermined the confidence of investors and clients.
- Credit Suisse has been plagued by a series of scandals in recent years. Shares were worth 12.78 Swiss francs ($13.84) in February 2021.
- In 2022, the bank suffered a net loss of $7.9bn and expects a “substantial” pre-tax loss this year.
How significant is Credit Suisse?
- Credit Suisse ranks among the world’s largest wealth managers and, crucially, it is one of 30 global systemically important banks, whose failure would cause ripples through the entire financial system.
- Credit Suisse has local wealth management, investment banking, a local Swiss bank and asset management operations.
- It has just over 50,000 employees and 1.3 trillion Swiss francs ($1.4 trillion) in assets under management at the end of 2022, down from 1.6 trillion a year earlier.
- With more than 150 offices in about 50 countries, Credit Suisse is the private bank for a large number of wealthy clients, both individuals and companies.