Switzerland’s biggest bank UBS is being urged by officials to heed the deal on the line to avoid a wave of contagion hitting markets on Monday.
largest of the wealthy alpine nation banks Urgent talks were underway with the country’s banking and regulatory authorities this weekend, several media outlets reported.
The generally informed newspaper Blick said UBS would buy Credit Suisse during an extraordinary meeting on Sunday in Bern to bring together executives from the Swiss government and banks.
A merger of this scale, which involves the swallowing up of all or part of a bank, causing unease among investors, typically takes 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.
The newspaper said, “Everything points to a Swiss solution this Sunday. And when the stock market opens on Monday, Credit Suisse could be a thing of the past.”
Credit Suisse, the country’s SNB central bank and Swiss financial watchdog FINMA all declined to comment when contacted by AFP about the possibility of a UBS takeover.
The Swiss government held an emergency meeting in the capital Bern late Saturday to discuss the situation. Swiss news agency ATS reported that a government spokesman declined to comment on the talks.
Acquisition of this size is extremely complex.
According to a Bloomberg report citing anonymous sources, UBS will need a public guarantee to cover legal costs and potential damages.
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.
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 Financial Times newspaper, Credit Suisse customers withdrew 10 billion Swiss francs ($10.8 billion) in deposits in a single day late last week – a measure of how much confidence in the bank has collapsed.
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 the going bank.
FINMA and the SNB have said that Credit Suisse “meets capital and liquidity requirements” on such banks, but mistrust persists.
Credit Suisse’s share price fell more than 30 percent on Wednesday to a new record low of 1.55 Swiss francs, amid fears of a contagion following the collapse of two banks in the United States.
After recovering some ground on Thursday, Credit Suisse 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 has a net loss of $7.9 billion, and a “substantial” pre-tax loss is expected this year.
“This is one bank that’s never going to get its house in order,” IG analyst Chris Beauchamp commented in a market note this week.
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.