UBS Buys Credit Suisse for $3.2 Billion

Switzerland’s largest bank, the Union Bank of Switzerland, buys its smaller rival, Credit Suisse, for $3.2 billion, in a deal brokered by the Swiss government on 19 March 2023. In what is known as an “emergency rescue”, the banks now have combined assets worth $5 trillion, according to UBS. As a result, UBS’ shares increased by 3.8 percent.

The government supported the transaction by lending UBS 100 billion Swiss francs. The takeover and state’s intervention within the same, “has laid the foundation for greater stability both in Switzerland and internationally”, said Karin Keller-Sutter, a member of the Swiss Federal Council.

Credit Suisse, a prestigious bank founded in 1856 to finance the Swiss rail network, was on the verge of financial collapse. Last week, their shares decreased by 54 percent. In an effort to generate liquidity, and recover from scandals, lawsuits, and failed reforms over the past years, Credit Suisse was compelled to borrow $54 billion from the central bank.

Ipek Ozkardeskaya, a senior analyst at Swissquote Bank told Reuters, “[i]n theory, there is no reason for the Credit Suisse crisis to extend, as what triggered the last quake for Credit Suisse was a confidence crisis – which doesn’t concern UBS - a bank outside of the turmoil, with, in addition, ample liquidity and guarantee from the SNB (Swiss National Bank) and the government”.

According to CNN, the shareholders of Credit Suisse will take the biggest hit. From a stock that was worth 1.86 francs, the shareholders will now receive 0.76 francs. The owners of additional tier one bonds, “a riskier class of bank debt”, as confirmed by Swiss regulators, would lose everything.

After the Silicon Valley Bank’s collapse, like dominoes, institutions that were once financial giants, are now falling.