The Swiss government is close to announcing a deal that would involve UBS buying Credit Suisse, its smaller, beleaguered rival, for about $1 billion, three people with knowledge of the matter said on Sunday.
The Credit Suisse takeover is the most serious fallout yet of the turmoil that has spread since the implosion of Silicon Valley Bank earlier this month. But Credit Suisse’s troubles were largely self-inflicted, linked to years of scandals and financial mistakes that cost it billions of dollars in business losses and court fines.
Even a $54 billion bailout from the Swiss National Bank, announced last week, failed to stem the erosion of investor confidence that sent Credit Suisse shares to record lows. Talks between Credit Suisse and the much stronger UBS intensified over the past week as Swiss banking authorities sought to avoid a messy dissolution of Credit Suisse.
Under the terms of the proposed deal, UBS will pay just a fraction of the roughly 8.8 billion Swiss francs, or $9.5 billion, that Credit Suisse was valued at on Friday, these people said. They warned that the terms were still being negotiated at the last minute and the talks could still fall apart.
Representatives of Credit Suisse and Swiss National Bank declined to comment, while representatives of UBS and Finma, the Swiss financial regulator, could not immediately be reached.
The Swiss government is expected to allow circumvention of some financial rules, notably a six-week consultation period with UBS shareholders before any transaction is approved.
The potential move marks the unwinding of the 166-year-old institution created to finance Switzerland’s rail network, which has risen to the top echelons of finance and at times stood alongside US titans such as JPMorgan Chase. But Credit Suisse has been dogged by scandals over the years – from money laundering to bad betting – that have left it reeling from losses and tarnished its reputation.
The bank has struggled to turn itself around in recent months, but two events last week contributed to Credit Suisse’s downfall. First, the bank disclosed on Tuesday that there were “material deficiencies” in its financial reporting. And second, there was a broad and growing panic about the health of banks: As lenders’ stocks around the world tumbled after the collapse of Silicon Valley Bank and Signature Bank, markets became especially wary of Credit Suisse.
Credit Suisse’s share and bond prices fell sharply all week, as did the cost of insuring its debt against default, despite efforts by Swiss regulators to boost investor confidence. On Thursday, Credit Suisse said it would tap a $54 billion lifeline from the Swiss central bank in hopes of averting disaster.
Details of the proposed transaction with UBS were previously announced Financial Times.
This is a developing story. Watch for updates.
