Over the weekend, Swiss banking giant UBS Group agreed to buy its rival Credit Suisse for 3B Swiss francs ($3.2B).
The deal was encouraged by Swiss authorities after Credit Suisse said it would borrow up to 50B Swiss francs ($54B) from the Swiss National Bank under a covered loan facility and a short-term liquidity facility.
- Credit Suisse Chairman Axel Lehmann said recent bank troubles in the U.S. accelerated customers’ loss of trust in Credit Suisse.
- Lehmann added that the bank could not continue to exist in its current form.
- According to sources, customers withdrew about $10B daily in the week following U.S.-based Silicon Valley Bank’s collapse.
- Swiss regulators were concerned that Credit Suisse’s failure would make Switzerland a new source of contagion for global stress.
- Hours following the UBS-Credit Suisse deal, a group of central banks, including the U.S. Federal Reserve, the Bank of England, the Bank of Japan, and the Bank of Canada, announced an expansion in the frequency of dollar swap line operations.
- On Monday, Credit Suisse bondholders protested the UBS deal, and the European Central Bank warned that that deal would wipe out $17B of Credit Suisse’s bonds.
- The ECB said the deal went against debt recovery norms and undermined confidence in the financial market.
- Under the UBS-Credit Suisse purchase agreement, AT1 bondholders would receive nothing, while Credit Suisse shareholders would get 3B Swiss francs ($3.2B).
