Last day for UBS to swallow Credit Suisse and avoid debacle

Switzerland’s biggest bank UBS, pushed by authorities, should fully finalize its takeover of rival Credit Suisse this Sunday to avoid a debacle and a wave of contagion panic in markets on Monday.

UBS will buy Credit Suisse and the deal will be sealed in Bern on Sunday during an extraordinary meeting of the government and leaders of the two banking giants, the normally well-informed tabloid Blick said on Saturday.

The merger of the country’s two biggest banks, one of which has been fueled by growing investor mistrust, is a complex affair that would normally take months. UBS will have a few days.

– Pressure –

But the Swiss authorities have no choice but to push UBS to overcome its reluctance, says Blick, due to the enormous pressure exerted by Switzerland’s major economic and financial partners, who are keen to have their own financial centre. are afraid

French Finance Minister Bruno Le Maire gave a clear message in Le Parisien: “We are now waiting for a definitive and structural solution to the problems of this bank”.

The US Treasury also indicated that it was closely monitoring the matter.

UBS and Credit Suisse signed on a street in Zurich, March 18, 2023 (AFP – Fabrice COFFRINI)

The Swiss market opens on Monday at 08:00 GMT and until then a solution has to be found for the bank, regarded as a weak link in the region.

Credit Suisse was valued at barely 7 billion Swiss francs (about as many euros) at the close of the stock market on Wednesday after a record plunge, a pittance for a bank that – like UBS – has 30 establishments around the world. Is. They are considered too important to let fail.

But the bank’s customers deposited 10 billion Swiss francs in a single day late last week, according to the Financial Times and Blick. A solid sign of mistrust of the establishment.

– Public Guarantee –

According to the Bloomberg agency, UBS is demanding that public authorities bear legal costs and potential damages that could run into billions of francs.

Discussions on the investment bank falter, indicated the financial agency, adding that one of the scenarios under study is an acquisition of Only Assets and Wealth Management with a sale of the investment bank.

Discussions have also focused on the fate of the reserve for Credit Suisse’s Swiss branch, one of the group’s most profitable parts, which lost 7.3 billion Swiss francs last year and is still counting on “substantial” losses in 2023. doing.

This branch brings together retail banking and loans to SMEs. One of the paths considered by analysts is an IPO, which would also avoid mass layoffs in Switzerland due to duplication of UBS activities.

On Wednesday, mistrust from investors and partners prompted the Swiss central bank to lend 50 billion Swiss francs to revive Credit Suisse and reassure markets. However, the respite was only short-lived.

– What about the Competition Commission? ,

Credit Suisse has recently experienced two years marked by numerous scandals which, by management’s own admission, revealed “substantial weaknesses” in its “internal controls”.

In front of the headquarters of Credit Suisse in Zurich, March 18, 2023 (AFP - Fabrice COFFRINI)
In front of the headquarters of Credit Suisse in Zurich, March 18, 2023 (AFP – Fabrice COFFRINI)

The Federal Financial Market Supervisory Authority (FINMA) accused him of “seriously breaching his prudential obligations” in the bankruptcy of the financial company Greenseal, which marked the beginning of his string of failures.

In contrast, UBS, which spent years recovering from the shock of the 2008 financial crisis and massive state bailout, is starting to reap the rewards of its efforts, and according to several media outlets the bank has no intention of closing before the weekend. Was at Credit Suisse Adventure.

Depending on the configuration of the acquisition, the Competition Commission may also raise eyebrows.

– Fast, strong –

In late October, Credit Suisse unveiled a massive restructuring plan providing for the elimination of 9,000 positions, or more than 17% of its workforce, by 2025.

The bank, which employed 52,000 people at the end of October, plans to separate investment banking from the rest of its activities to focus on its most stable parts, including wealth management.

But as Blick points out: “Everything points to a Swiss solution this Sunday. And Credit Suisse could be a thing of the past when the stock market opens on Monday.”

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