According to the Financial Times, UBS has offered to take over the ailing Credit Suisse for up to $1 billion. That would be around CHF 0.25 per share. The closing price on Friday was CHF 1.86. Banks, authorities and members of the government in Switzerland are negotiating the rescue of Credit Suisse under great time pressure. The business should apparently be fixed by Sunday evening.
That is also necessary, as the Linz economist Friedrich Schneider says: “A solution is needed before the stock exchanges in Asia open.” There is a “highly dynamic” development. Problems at Credit Suisse have been known for a long time, but for too long people just looked on, “now the house is ablaze, you have to put it out and try to save the substance.” Apparently not enough lessons were learned from the financial crisis of 2007 to 2009.
According to Schneider, it is not certain whether the takeover by UBS is a good solution. “We will see if UBS is able to swallow this big bank.” In any case, creating even larger banks is not desirable. A possible nationalization would probably be opposed to the Swiss government.
When asked by OÖN, Austria’s Ministry of Finance announced that it was “constantly in contact with the experts”. “These assure us that major effects on Austrian banks are not to be expected. However, we will continue to monitor the situation closely.”
According to media reports, all sides are aiming for a takeover of Credit Suisse by the largest bank USB before the exchanges open on Monday. The emergency merger will probably come about, reported the generally well-informed tabloid Blick. The takeover of the second largest bank by the USB is to be sealed later today at an extraordinary meeting in Bern, which will bring together the government and bank executives. The public should be informed later.
According to the “Financial Times”, UBS is negotiating to take over all or part of the rival with the blessing of the Swiss supervisory authorities. An agreement may be imminent, but there is “no guarantee,” the paper reported on Saturday.
A merger of this magnitude, involving the full or partial takeover of a bank that is causing growing unease among investors, would normally take months. UBS only had a few days. She had resisted it for a long time – according to “Blick”, however, the pressure to find a quick solution was too great and the authorities felt compelled to intervene.
more on the subject
Credit-Suisse and UBS: Elephant wedding to protect financial system
State Guarantees
A purchase of this size is a complex matter: The big bank would need government guarantees to cover legal costs and potential losses, as the financial news agency Bloomberg reported. In addition, the takeover of the country’s second largest bank by the largest bank could raise eyebrows at the Swiss Competition Commission.
Credit Suisse, the Swiss National Bank (SNB) and the Swiss financial regulator Finma initially did not want to comment on the reports of a possible takeover by UBS. The government also did not want to comment after another crisis meeting on Saturday evening, as reported by the Swiss news agency sda.
But everything points “to a Swiss solution on Sunday”, wrote “Blick”: “If the Swiss stock exchange opens on Monday, Credit Suisse could be history.”
Great pressure from abroad
The Swiss “SonntagsZeitung” spoke of the “merger of the century”. The unthinkable is coming true, Credit Suisse is about to be taken over by UBS, wrote the weekly. Accordingly, the government, Finma and SNB saw no other option: the pressure from abroad had become too great – and the fear that the reeling Credit Suisse could trigger a global financial crisis.
UBS and Credit Suisse are among the 30 banks worldwide classified as “too big to fail” because their failure would have a devastating impact on the wider economy.
Credit Suisse has come under further pressure after a series of previous scandals, including the closure of two US banks, Silicon Valley Bank and Signature Bank, which had worried the sector. Statements by the largest shareholder from Saudi Arabia, the Saudi National Bank, that they did not want to increase investments in the Swiss institute sent the price plummeting.
Despite massive support from the SNB, the Credit Suisse share price collapsed again on Friday after a brief recovery. It is now eagerly awaited whether the major bank can avoid another slide when trading on the Swiss stock exchange begins at 09:00 CET on Monday.
