The Swiss National Bank has offered UBS Group AG around $100 billion in liquidity to help it take on the operations of Credit Suisse Group AG, said the report
The Swiss financial industry is in a state of flux as news emerged that UBS Group AG is set to take on the operations of Credit Suisse Group AG. The move comes as Credit Suisse struggles to recover from a series of scandals that have left investors and clients jittery. The deal is said to involve the Swiss National Bank offering UBS around $100 billion in liquidity to help it take on Credit Suisse's operations.
The turmoil that has engulfed Credit Suisse started with the collapse of Silicon Valley Bank and Signature Bank in the United States. The collapse sparked a rout in banking stocks and led to a series of extraordinary measures being implemented by authorities to keep banks afloat. Credit Suisse has been particularly badly affected by the fallout, with its shares losing a quarter of their value in the last week.
Credit Suisse is a 167-year-old company that ranks among the world's largest wealth managers. It is also one of 30 global, systemically important banks whose failure would have a ripple effect throughout the entire financial system. The bank was forced to tap $54 billion in central bank funding in an attempt to recover from the series of scandals that have rocked the company.
In contrast, UBS had earlier tabled an offer of about $1 billion, or 0.25 francs a share for Credit Suisse. The offer was met with resistance from Credit Suisse, which cited concerns over a material adverse change clause that could void the deal if its credit default spreads jumped. However, UBS has agreed to a softening of the clause, which has cleared the way for the deal to proceed.
Swiss authorities are expected to change the country's law to bypass a UBS shareholder vote, according to the report. This move has raised concerns among some observers, who fear that it could set a dangerous precedent. However, others have argued that it is necessary to ensure the stability of the Swiss financial system.
While Credit Suisse avoided a bailout during the financial crisis, it has been beset by a series of blowups, scandals, leadership changes, and legal issues over recent years. Clients had pulled more than $100 billion of assets in the last three months of last year as concerns mounted about its financial health, and the outflows continued even after it tapped shareholders in a 4 billion-franc capital raise.
The deal between UBS and Credit Suisse is likely to have far-reaching implications for the Swiss financial industry. It could lead to a consolidation of the sector, with fewer players vying for market share. However, it could also lead to a concentration of risk, with the failure of one bank having a more profound impact on the entire system. Only time will tell whether the deal will prove to be a masterstroke or a miscalculation.
