After Credit Suisse Group AG announced it would borrow 50 billion Swiss francs from the Swiss National Bank, UBS Group AG is considering buying the banking giant. However, UBS is asking the authorities to issue a backstop to protect against potential losses if it buys Credit Suisse. According to unnamed sources familiar with the matter, UBS, which is the world’s largest private bank, wants the government to safeguard the agreement.
Credit Suisse’s problems deepen as UBS considers takeover amid banking industry challenges
There are many deals that happen behind the scenes in the modern banking world. On Friday, it was reported that UBS Group AG is in discussions to buy all or part of banking giant Credit Suisse Group AG. Sources familiar with the talks say that the Swiss Financial Supervisory Authority (FINMA) and the Swiss National Bank are involved in the discussions between UBS and Credit Suisse. Swiss regulators note that the merger, dubbed “Plan A,” is an attempt to strengthen investors’ and depositors’ confidence in Credit Suisse. On Thursday, Credit Suisse announced it was borrowing 50 billion Swiss francs ($54 billion) from the Swiss National Bank to shore up liquidity.
On Saturday, Bloomberg and several other publications reported that merger talks have intensified, and UBS wants protection against potential losses it could face if it buys Credit Suisse. Bloomberg contributors Jan-Henrik Foerster, Dinesh Nair, Marion Halftermeyer and Esteban Duarte detailed that UBS is discussing specific scenarios with the Swiss government. According to sources familiar with the matter who requested anonymity, UBS is interested in Credit Suisse’s wealth and asset management units, but the bank wants a government-brokered deal that includes a backstop.
The report further stated that prior to the Swiss government broker discussions, UBS executives were hesitant to buy the rival bank and take on the risks associated with Credit Suisse. Sources familiar with the matter told Reuters that Credit Suisse CFO Dixit Joshi and his team met over the weekend to discuss the bank’s options. Besides UBS, the report notes there were several reports of interest from rivals. This is not the first sign of trouble for the Swiss bank, as Credit Suisse and Deutsche Bank suffered troubled valuations last October. At the time, the banking giant’s credit default insurance was approaching 2008 levels.
Credit Suisse’s current problems intensified after the failures of Silvergate Bank, Silicon Valley Bank and Signature Bank. In addition, 11 lenders injected $30 billion into First Republic Bank last week to prevent the bank from collapsing. Over the past seven days, Credit Suisse’s shares have lost about a quarter of their value. Year to date, Credit Suisse’s stock is down 35.58%.
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Should the Swiss government provide a backstop to protect UBS’s acquisition of Credit Suisse? In the comments section below, let us know what you think about this topic.
Jamie Redman
Jamie Redman is the news editor at Bitcoin.com News and a financial technology journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.
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