UBS will need a public guarantee to cover legal costs and potential damages, reports

Zurich, Switzerland:

UBS was in talks on Sunday to finalize its giant acquisition of troubled rival Swiss bank Credit Suisse and reassure investors ahead of the reopening of markets.

Switzerland’s biggest bank UBS is being urged by authorities to strike a deal on the line to avoid a wave of contagion panic hitting markets on Monday, according to multiple media reports.

The wealthy Alpine country’s biggest bank has been holding urgent talks with the government, central bank and financial regulators throughout the weekend.

The 20-minute newspaper filmed members of the Swiss government, including President Alain Berset, walking into the finance ministry in Bern early Sunday, with the building’s window shutters down, Swiss news agency ATS reported. I went.

Blick newspaper said UBS would buy Credit Suisse in a deal that would be sealed later on Sunday at a meeting of government and banks officials in Bern.

A merger of this scale – swallowing all or part of a bank that has sparked growing investor disquiet – would normally take months. UBS will have a few days.

Blick said, however, that the Swiss authorities felt that UBS had no choice but to overcome its reluctance due to heavy pressure from Switzerland’s major economic and financial partners fearing for their own financial centres.

“When the stock market opens on Monday, Credit Suisse could be a thing of the past,” the tabloid said.

The Financial Times newspaper cited unnamed sources as saying that under Swiss regulations, while UBS must consult shareholders normally in six weeks, it could use emergency measures to skip the consultation period and the shareholder vote.

According to a Bloomberg report citing anonymous sources, UBS will need a public guarantee to cover legal costs and potential damages.

‘merger of the century’

Credit Suisse, the country’s SNB central bank and Swiss financial watchdog FINMA all declined to comment on the talks when contacted by AFP.

The government did not immediately respond when contacted by AFP on Sunday.

SonntagsZeitung newspaper called it “the merger of the century”.

The weekly said, “The unthinkable comes true: Credit Suisse is about to be acquired by UBS.”

It claimed that the government, FINMA and the SNB “see no other option”.

“Pressure from abroad had become too great – and the fear that Credit Suisse could trigger a global financial crisis,” it said.

too big to fail?

Like UBS, Credit Suisse is one of 30 banks around the world that are considered globally systemically important banks – banks so important to the international banking system that they are considered too big to fail.

But the market moves seemed to see the bank as a weak link in the chain.

“We are now waiting for a definitive and structural solution to the problems of this bank,” French Finance Minister Bruno Le Maire told Le Parisien newspaper. “We remain extremely cautious.”

According to the FT, Credit Suisse customers withdrew deposits worth 10 billion Swiss francs ($10.8 billion) in a single day late last week – a measure of how much trust in the bank has fallen.

After a turbulent week in the stock market that forced the SNB to step in with a $54 billion lifeline, Credit Suisse was valued at more than $8.7 billion as of Friday evening – one of 30 leading institutions worldwide Too little for a bank to be considered.

FINMA and the SNB said Credit Suisse “meets the capital and liquidity requirements” imposed on such banks, but mistrust persists.

stock market crash

Credit Suisse’s share price plunged more than 30 percent on Wednesday to a new record low of 1.55 Swiss francs, amid fears of contagion following the collapse of two US banks.

After recovering some ground on Thursday, its shares fell eight percent to close at 1.86 Swiss francs on Friday, as the Zurich-based lender struggled to retain investor confidence.

Credit Suisse has been plagued by a series of scandals in recent years. The shares were valued at 12.78 Swiss francs in February 2021.

In 2022, the bank faces a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.

The notion of Switzerland’s largest banks joining forces has surfaced over the years, but has generally been dismissed due to competition issues and risks to the stability of the Swiss financial system.

“Credit Suisse management, even if forced to do so by authorities, will only choose (this option) if they have no other solution,” said David Benmau, chief investment officer at Paris-based Axiom Alternative Investments.

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