Switzerland,March 20: Swiss bank UBS has agreed to buy crisis-hit rival Credit Suisse for 3 billion francs ($3.23 billion), while taking over losses of up to $5.4 billion.
Credit Suisse's merger agreement with UBS is supported by Swiss authorities to help stabilize the market amid the recent banking crisis.
As part of the deal, the Swiss central bank will support UBS and Credit Suisse with 100 billion francs ($108 billion) in liquidity, according to Reuters.
In addition, the government provides a loss guarantee of up to 9 billion francs for part of the portfolio. This guarantee will be activated if the portfolio actually loses. In that case, UBS would suffer the first loss of 5 billion francs, the government would suffer the loss of the next 9 billion francs, and UBS would suffer further losses if any.
After a freefall last week, Credit Suisse's share price at the close of trading on March 17 was 1.86 francs per share, and the bank's value was more than $8.7 billion.
Credit Suisse is Switzerland's second largest commercial bank, after UBS. Both are on the list of 30 important banks in the global system, meaning too big to fail. Last year, UBS profited $7.6 billion while Credit Suisse lost $7.9 billion, according to Reuters. Credit Suisse's share price is down 74% from a year ago while UBS's stock is relatively flat.
Credit Suisse's share price fell more than 30% on March 15 after the main shareholder announced not to buy more shares. The echoes from the collapse of Silicon Valley and Signature banks in the US earlier exacerbated the crisis. Credit Suisse was then provided with $54 billion in liquidity support by the central bank.
Finance Minister Karin Keller-Sutter said that the possibility of Credit Suisse default could cause irreparable economic instability and related damage to the domestic financial market, not to mention the risk to banks. other.
The merger thus lays the groundwork for stability in Switzerland as well as internationally. According to AFP, the UBS takeover of Credit Suisse has been positively received by Europe and the US.
Source: ThanhNien Newspaper