To stop future market-shaking turbulence in the global banking industry, banking behemoth UBS is purchasing its smaller rival Credit Suisse for $3.2 billion, Swiss President Alain Berset revealed on Sunday night.
“One of significant importance for the stability of world finance,” said Berset of the announcement. Unimaginable repercussions for the nation and the global financial system would result from an unchecked collapse of Credit Suisse.
Berset is one of the seven members of the Swiss Federal Council, which issued an emergency resolution allowing the merger to proceed without shareholder consent.
Axel Lehmann, chairman of Credit Suisse, described the transaction as “a definite turning point.”
Lehmann stated, “It is a historic, terrible, and very trying day for Credit Suisse, Switzerland, and the international financial markets.
The focus is now on the future, particularly the 50,000 employees of Credit Suisse, of whom 17,000 work in Switzerland.
Colm Kelleher, the chairman of UBS, praised the “enormous prospects” that result from the acquisition and emphasized his bank’s “conservative risk culture” — a subtly disparaging dig at Credit Suisse, whose culture is recognized for taking more daring, riskier bets in exchange for greater rewards.
He claimed the combined organization would produce a wealth manager with more than $5 trillion in invested assets.
In addition to the 50 billion Swiss francs ($54 billion) sum made public, Berset said that the council had also decided to guarantee Credit Suisse a total of 150 billion Swiss francs ($162 billion) in liquidity.
But it wasn’t enough.
We noticed that the market volatility and liquidity withdrawals showed that the requisite confidence could not be restored and that a swift remedy to ensure stability was required.
The council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this condition at all,” according to Swiss Finance Minister Karin Keller-Sutter.
The merger of the two largest and most well-known Swiss banks, each with illustrious histories dating back to the middle of the 19th century, is a thunderclap for Switzerland’s status as a major international financial hub, putting the country on the verge of having a single national banking champion.
Despite purchasing Credit Suisse, UBS officials said they want to sell off a portion of the company or shrink the bank over the following months and years.
The agreement, anticipated to close by the end of the year, will be supported by a 100 billion Swiss franc ($108 billion) loan from the Swiss central bank secured by a federal default guarantee.