Authorities rushed to save Credit Suisse before financial markets reopened on Monday.
Switzerland’s biggest bank, UBS, has agreed to buy Credit Suisse for 3 billion Swiss francs ($3.24 billion), bank officials said, in a deal to contain a growing crisis of confidence in global finance.
The deal, announced Sunday evening, includes 100 billion francs ($108 billion) in liquidity assistance for UBS and Credit Suisse from the Swiss central bank.
“With the takeover of Credit Suisse by UBS, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss Central Bank said.
The Swiss Financial Market Supervisory Authority (FINMA) said there was a risk that Credit Suisse had become “illiquid, even if it remained solvent, and that it was necessary for the authorities to act”.
To allow UBS to take over Credit Suisse, the federal government is providing a loss guarantee of up to 9 billion francs ($9.7 billion) for a clearly defined part of the portfolio, the government said.
This will be activated if losses are actually incurred on this portfolio. In that event, UBS would bear the first 5 billion francs ($5.4 billion), the federal government the next 9 billion francs ($9.7 billion) and UBS would bear any additional losses, the government said.
Credit Suisse, a 167-year-old bank, has been the biggest name caught in the market turmoil triggered by the recent collapse of US lenders Silicon Valley Bank and Signature Bank, forcing it to dip $54 billion in funding from the central bank last week.
Authorities had scrambled to rescue Credit Suisse, one of the world’s largest wealth managers, before financial markets reopened on Monday.
FINMA, which said it had approved the takeover, said recent stabilization measures were “not sufficient to restore confidence in the bank, however, and more ambitious options were also being considered”.
UBS and Credit Suisse are both part of a group of 30 global systemically important banks closely watched by regulators, and Credit Suisse’s failure would ripple through the entire financial system.
The announcement came on a breakthrough weekend after some rivals grew cautious about their dealings with the struggling Swiss lender, and its regulators urged it to strike a deal with UBS.
The fortunes of the two banks have diverged sharply over the past year. UBS made $7.6 billion in profit in 2022, while Credit Suisse lost $7.9 billion. Shares of Credit Suisse are down 74% from a year ago, while those of UBS are relatively flat.