Leading Swiss hold a news conference on Sunday night after multiple media reports reported that banking giant UBS is said to be in talks to acquire its smaller rival Credit Suisse to avoid further market-shattering global banking turmoil.
The Bundesrat, the seven-member governing body that includes Swiss President Alain Berset, is expected to announce that UBS will acquire Credit Suisse in a potential deal brokered by the Swiss government.
Sunday’s news conference follows last week’s collapse of two major US banks, which prompted a frantic, broad-based response from the US government to prevent further bank panics. Still, global financial markets have been on edge since Credit Suisse stock prices began falling this week.
Credit Suisse, 167, has already received a $50 billion (54 million Swiss francs) loan from the Swiss National Bank, prompting a brief rally in the bank’s share price. But the move didn’t seem enough to stem an outflow of deposits, according to news reports.
Still, many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures prompted major bailouts from the Federal Deposit Insurance Corporation and the Federal Reserve. As a result, their demise doesn’t necessarily signal the start of a financial crisis, much like it did in 2008.
The deal caps a highly volatile week for Credit Suisse, particularly on Wednesday when its shares fell to a record low after its biggest investor, the Saudi National Bank, announced it would stop investing money in the bank to avoid getting involved would if its stake increased by about 10%.
Shares fell 8% on Friday to close at 1.86 francs ($2) on the Swiss stock exchange. The share has come a long way: in 2007 it was listed at over 80 francs.
The current troubles began after Credit Suisse reported on Tuesday that managers identified “material weaknesses” in the bank’s internal controls over financial reporting late last year. That fueled fears that Credit Suisse could be the next domino to fall.
Although smaller than its Swiss rival UBS, Credit Suisse is considered a globally systemically important bank. The firm has major trading offices around the world, serves the rich and affluent through its wealth management business and is a key advisor to global companies on mergers and acquisitions. Notably, Credit Suisse did not require government support during the 2008 financial crisis, while UBS did.
Despite the banking turmoil, the European Central Bank on Thursday approved a big half-a-point rate hike to try to stem stubbornly high inflation, and said Europe’s banking sector was “resilient” with strong finances.
ECB President Christine Lagarde said banks were “in a completely different position to 2008” during the financial crisis, partly because of tighter government regulation.
The Swiss bank has been pushing to raise money from investors and launch a new strategy to overcome a series of problems including bad bets on hedge funds, repeated top management reshuffles and a spy scandal involving UBS.
The Associated Press
