London (CNN) Switzerland’s biggest bank, UBS, has agreed to buy its ailing rival Credit Suisse in a bailout deal aimed at stemming financial market panic sparked by the failure of two US banks earlier this month.
“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. “This takeover was made possible with the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority and the Swiss National Bank,” the central bank added.
It said the bailout would “ensure financial stability and protect the Swiss economy.”
Swiss credit (CS) had lost the confidence of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But the trust collapsed last week after it acknowledged “material weakness” in its accounting and as the demise of Silicon Valley Bank and Signature Bank spread fears of weaker institutions at a time when rising interest rates have undermined the value of some financial assets.
Shares in the 167-year-old bank fell 25% during the week as money poured in from investment funds it manages, and at one point account holders withdrew deposits of more than $10 billion a day, the Financial Times reported. An emergency loan from the Swiss National Bank failed to stop the bleeding.
Desperate to prevent the meltdown from spreading through the global financial system on Monday, Swiss authorities had pushed hard for a private sector bailout while reportedly considering Plan B – a full or partial nationalization.
The emergency takeover was agreed after several days of frantic negotiations involving financial regulators in Switzerland, the United States and the United Kingdom. UBS (UBS) and Credit Suisse are among the 30 most important banks in the global financial system, and together they have nearly $1.7 trillion in assets.
The global headquarters of UBS and Credit Suisse are just 300 yards apart in Zurich, but the banks’ fortunes have been on very different paths recently. Shares in UBS have risen 15% in the past two years, and it posted a profit of $7.6 billion in 2022. It had a market capitalization of about $65 billion as of Friday, according to Refinitiv.
Credit Suisse shares have lost 84% of their value over the same period, and last year had a loss of 7.9 billion. It was worth just $8 billion at the end of last week.
Credit Suisse dates back to 1856 and has its roots in the Schweizerische Kreditanstalt (SKA), which was created to finance the expansion of the railway network and the industrialization of Switzerland.
As well as being Switzerland’s second largest bank, it looks after the wealth of many of the world’s richest people and offers global investment banking services. It had more than 50,000 employees by the end of 2022.
This is a developing story and will be updated.