UBS to Buy Credit Suisse for $3.24B in Govt-brokered Deal

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Facts

  • On Sunday, UBS, Switzerland's largest bank, agreed to buy Credit Suisse for approximately $3.24B ($3B Swiss francs) in a deal that contains $108B ($100B Swiss francs) in liquidity assistance from the Swiss central bank.1
  • The takeover price is approximately 60% less than what the bank was worth when the market closed last Friday. Credit Suisse shareholders will receive the equivalent of 0.76 Swiss francs ($0.82) for UBS stock, replacing the shares in Credit Suisse that were worth 1.86 Swiss francs before the weekend.2
  • The 167-year-old Swiss lender had faced troubles in recent years, including a sell-off of shares in 2021 triggered by losses associated with the collapse of Greensill Capital. This February, the company announced that clients had pulled 110B Swiss francs ($119B) of funds in the fourth quarter of 2022 while suffering their biggest annual loss since the financial crisis.3
  • Swiss authorities brokered the deal in an attempt to halt a confidence crisis in the global financial markets, despite already giving the bank an emergency loan earlier last week.4
  • The US Federal Reserve has also given its assent to the deal. The Swiss government intends to circumvent standard corporate governance rules by halting a UBS shareholder vote on the takeover, a move that has faced criticism. To do this, the government is preparing to introduce legislation that will bypass the normal six-week consultation period to process the deal immediately.5
  • Swiss authorities have also announced that $17B worth of Credit Suisse's Additional Tier 1 bonds would be completely wiped out by the merger. On Monday, in response to the deal, shares in UBS Group AG dropped by more than 12%.6

Sources: 1Al Jazeera, 2CNN, 3Reuters, 4Independent, 5Ft and 6Yahoo finance.

Narratives

  • Pro-establishment narrative, as provided by Et now. There have been much bigger banking collapses in the past and the move by UBS and the Swiss government is part of a typical financial pattern. Banking is a business of confidence and deals as these must occur for such confidence to remain in the global markets. The primary objective is to keep the depositors safe, which is exactly what central bankers are doing right now.
  • Establishment-critical narrative, as provided by Tax research uk. With a bank such as Credit Suisse to be bailed out in a manner horribly reminiscent of 2008, it is time for a radical rethinking of central bank policy. Such crises are the product of the central banks' policies and failure to supervise. Bankers cannot continue to attempt to serve both society and themselves — they must make the right decision or the markets are at risk of falling off a cliff.

Predictions