To prevent further turmoil in the global banking system, Swiss authorities have orchestrated a shotgun merger between UBS and Credit Suisse, with UBS agreeing to buy its rival for 3 billion Swiss francs ($3.23 billion) and assuming up to $5.4 billion in losses.
The regulators’ intervention was prompted by concerns that a crisis of confidence in Credit Suisse could have a widespread impact on the financial system. The deal is expected to be completed by the end of 2023.
More About The UBS Group acquiring Credit Suisse:
The Swiss government was determined to avoid the negative publicity associated with bailing out a systemically important global bank, as happened during the 2008 financial crisis. However, some leading commentators have labeled the UBS takeover of Credit Suisse as a bailout, suggesting that some important lessons have not been learned from the 2008 crisis.
Significance of this development:
To prevent any negative effects on the broader financial system resulting from the takeover of the crisis-hit Credit Suisse by UBS, the Swiss National Bank (SNB) has agreed to provide UBS with $108 billion in loans as liquidity assistance under the agreement. Furthermore, Swiss authorities have also agreed to “absorb” some of the losses that UBS will have to bear as part of the deal.