Banking giant UBS is reportedly buying troubled rival Credit Suisse for almost $3.25 billion in a bid to arrest the financial panic that has swept the markets over the past week
Swiss authorities pushed for UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and the bank’s customers, as per a report by AP
Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held as "merger consideration", UBS said in a statement
The deal was “one of great breadth for the stability of international finance,” said Swiss President Alain Berset as he announced it Sunday night. "An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system"
As part of the deal, approximately 16 billion francs ($17.3 billion) in Credit Suisse bonds will be wiped out, according to reports
European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. However, these bonds are designed to be wiped out if a bank’s capital falls below a certain level, which was triggered as part of this government-brokered deal
Credit Suisse Chairman Axel Lehmann called the deal "the best available outcome". "Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome," Lehmann said
Credit Suisse's troubles began after it reported last week that managers had identified 'material weaknesses' in the bank’s internal controls on financial reporting as of the end of last year. That fanned fears that the bank would be the next domino to fall
The deal follows the collapse of two large US banks -- Silicon Valley Bank and Signature Bank -- that spurred a frantic, broad response from the US government to prevent any further panic