A redemption for a rescue operation. The largest Swiss bank, UBS, agreed on Sunday March 19 to buy its rival, Credit Suisse, battered on the stock market last week, thus pushing back the specter of a bankruptcy which would have caused a shock wave through the whole sector. global financial. The transaction amounts to 3 billion Swiss francs (3.02 billion euros) payable in UBS shares, or 76 cents only for a Credit Suisse share which was still worth 1.86 Swiss francs on Friday evening.
The information, first revealed by the daily FinancialTimeswas confirmed at the beginning of the evening by the Swiss federal government, which is betting on this merger to “restore trust”. This solution “is not only decisive for Switzerland (…) but for the stability of the whole financial system” world, assured the President of the Swiss Confederation, Alain Berset. Finance Minister Karin Keller-Sutter said at the press conference that the bankruptcy of Credit Suisse could have caused “irreparable economic damage”adding:
“For this reason, Switzerland must assume its responsibilities beyond its own borders. »
UBS will benefit from a guarantee of some 9 billion francs from the government which serves as insurance if problems were to be discovered in very specific portfolios of Credit Suisse, continued Mr.me Keller-Sutter. The Central Bank also grants a liquidity line of up to 100 billion Swiss francs to UBS and Credit Suisse.
Credit Suisse is one of the thirty most important banks in the world from a systemic point of view, institutions that governments cannot afford to abandon to their fate because of their size and their intertwining in the financial system. This weekend, financial authorities around the world watched the progress of the negotiations, fearing the contagion of panic in the event of failure.
Pressure from Switzerland’s main economic partners
The banking sector has been under stress since the major central banks have raised their rates sharply to try to control inflation. Many institutions have failed to prepare after years of having access to cheap money.
The recent bankruptcy of the Silicon Valley Bank in the United States, and other regional American banks, has increased the anxiety of investors and pushed them to sell the securities of the banks considered to be the weak links.
This is the case of Credit Suisse, which for two years has gone from resounding scandals to reverses. And despite the efforts of its management to tout a three-year restructuring plan, nothing worked. Investors voted with their feet and the Zurich establishment struggled to access liquidity at reasonable prices. A lifeline of 50 billion Swiss francs launched Wednesday by the Swiss Central Bank, after a black day on the stock market, gave only a brief respite to the bank.
The regulatory authorities and the federal government have had to face immense pressure from Switzerland’s main economic partners to clean up the situation before it contaminates the whole world.