UBS buys Credit Suisse for 3 billion Swiss francs – Economy

The US Treasury and the Fed welcome the agreement between Credit Suisse and UBS. This is what we read in a joint note. The capital and liquidity of US banks is strong. This was stated by US Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell.

“The euro area banking sector is resilient, with strong capital and liquidity positions”: said the president of the ECB, Christine Lagarde. “In any case – she adds – our policy toolbox is well equipped to ensure liquidity support to the financial system if necessary, and to preserve a calm programming of our monetary policy”.

UBS buys rival Credit Suisse for three billion Swiss francs ($3.35 billion). With an operation concocted by the Swiss Central Bank, with the involvement of the European and American authorities, the two giants get married in a historic agreement to try to defuse the crisis underway in the banking system, with a race over the weekend to resolve the case before the reopening of the markets.

Ubs CEO Ralph Hamers will lead the bank that will be born from the marriage between Credit Suisse and Ubs. The transaction will be carried out without the approval of the shareholders.

In announcing the agreement – the largest between two banks since the 2008 crisis reached at the end of a hectic weekend of non-stop negotiations – the Swiss authorities hastened to clarify that the operation “is not a rescue but a commercial solution “, the “best way to restore confidence”. The wedding, they explain from Bern, in fact “ensures financial stability” and protects “the Swiss economy in this exceptional situation”.

UBS will obtain up to 100 billion Swiss francs in liquidity from the Swiss central bank, as well as guarantees of 9 billion from the Swiss government to cover any losses by Credit Suisse. For Ubs, these are important ‘reassurances’ given that, given the way the agreement was structured, it has no chance of taking a step back, not even in the face of any opposition from the antitrust. “Financial stability is more important than antitrust in crises”, cut short by the FINMA, the market regulator. The agreement will have an impact on employment, with 10,000 jobs that according to rumors will be cut. With Ubs aiming for a cost cut of 8 billion. Ubs, in particular, undertakes to downsize the Credit Suisse investment bank, which was one of the major obstacles to overcome in reaching an agreement, and to obtain all the authorizations for the wedding as soon as possible which, in any case, will not be submitted to the vote of the shareholders. For Credit Suisse, the deal marks the end of 167 years of history and virtually wipes out 16 billion Swiss francs of AT1 bonds, which have been “completely devalued”. The world‘s central banks applaud the agreement. “The rapid action and decisions taken by the Swiss authorities” to resolve the Credit Suisse case “are crucial for restoring orderly market conditions and ensuring financial stability”, said ECB president Christine Lagarde, who underlined how banks of the Eurozone have a solid position and how in any case the ECB is ready to support the system if necessary.

Praises for Bern’s speed also come from the Bank of England. They applaud the US Treasury and the Fed which, in a joint note, also highlight how the capital and liquidity of US banks are solid. The stars and stripes authorities are also continuing to work for a solution on Silicon Valley Bank and Signature Bank, the two institutions that went bankrupt last week. According to rumors, the Fdic, the federal deposit insurance agency, intends to proceed with the stew for Svb given that it has not been able to find a suitable buyer to take over 100% of the bank. For Signature there would instead be the interest of New York Community Bancorp.