UBS Makes Deal Of Over $3 Billion To Buy Its Rival Credit Suisse

The Swiss Bank Credit Suisse announces merger plans with UBS in a historical deal of $3.25 billion following a discussion on Sunday, March 19. The Swiss Government finalized the agreement to prevent further aggravation of the international banking system.

What we know so far

The heated debate about the merger was carried out at the finance ministry in Bern, where authorities were trying to reach a conclusion before the markets opened on Monday in Asia and Europe.

UBS chairman Colm Kelleher and Credit Suisse counterpart Axel Lehmann accompanied Swiss President Alain Berset. The Swiss finance minister, the Swiss National Bank (SNB) central bank leaders, and the financial regulator FINMA were also present.

Berset claimed that the acquisition was the best answer for restoring the trust that has been absent in the financial markets in the prosperous Alpine nation, which is renowned for its banking prowess.

As per NDTV reports, Credit Suisse announced UBS would acquire the crisis-hit bank for “a merger consideration of three billion Swiss francs ($3.25 billion)”.Credit Suisse shareholders would get one UBS share for 22.48 Credit Suisse shares. The UBS will assume up to $5.4 billion in losses.

Events necessitating the Government Intervention

After a proposal for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to satisfy investors and the bank’s clients, Swiss authorities pushed for UBS to acquire its rival. Shares of Credit Suisse fell this week(even lower than 30% on Wednesday) due to worries about more potentially unstable institutions in the global financial system, which were raised by the recent bankruptcy of two most prominent U.S. banks.

Swiss authorities had to intervene and broker an agreement to stop a crisis of trust in Credit Suisse from spreading to the rest of the financial sector. By the end of 2023, the deal is scheduled to be finalized.

After the announcement of the Swiss agreement, the world’s central banks announced synchronized financial measures to assist banks over the next week. The initiatives include access to a lending facility for banks that need to borrow U.S. dollars, a practice common during the 2008 financial crisis.