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Acquisition of Credit Suisse by UBS

March 21, 2023

On 19 March 2023, Swiss investment bank UBS Group AG agreed to buy Credit Suisse for CHF 3 billion (US$3.2 billion) in an all-stock deal brokered by the government of Switzerland and the Swiss Financial Market Supervisory Authority.[1][2][3] The Swiss National Bank supported the deal with an offer to provide up to CHF 100 billion (US$104 billion) in liquidity to UBS following its takeover of Credit Suisse's operations,[4] while the Swiss government provided a guarantee to UBS to cover losses of up to CHF 9 billion ($9.6 billion) over the short term.[1] Additionally, CHF 16 billion (US$17.2 billion) of Additional Tier 1 bonds were written down to zero.[5]

Acquisition of Credit Suisse by UBS
InitiatorUBS
TargetCredit Suisse
TypeAll-stock full acquisition
CostCHF 3 billion (US$3.2 billion)
Initiated19 March 2023

Credit Suisse is a globally systemically important bank whose investment banking unit, First Boston, had been recently tarnished by a series of high-profile scandals. The banking crisis in the United States had caused fear among global investors and led to panic over other possibly troubled banks. Credit Suisse's share price plunged after the leading shareholder ruled out further investment into the bank due to regulatory issues.[6] The deal was rapidly agreed upon and announced just before the Asian financial markets opened on Monday morning in order to prevent "market shaking" turmoil in the global financial markets.[7] Soon after, central banks across the world announced USD liquidity measures to try and ease wider market panic and avoid a wider banking crisis.[6]

Background

Credit Suisse and the global financial crisis

Credit Suisse was founded in July 1856. Over the years the bank grew to a massive size, competing directly with other bulge bracket firms such as Goldman Sachs and Barclays. During the 2007–2008 financial crisis, Credit Suisse found itself in better financial shape compared to its peer banks;[8] while Swiss National Bank, the central bank, stepped in to rescue UBS after no private investor was willing to do so by purchasing of $60 billion of toxic assets and $5.3 billion in shares of stock from UBS as a form of a capital infusion, Credit Suisse raised a far smaller $9 billion privately from investors to shore up its financial position.[9]

In the years following the financial crisis, the bank continued to have a high appetite for risk, while its global peers became more averse to risk.[8] Credit Suisse kept its investment banking arm in the immediate years following the crisis—an arm that took risks aggressively in order to compete with large U.S. financial institutions—though many large U.S. banks and its Swiss counterpart UBS chose to pursue more conservative strategies and sold off riskier assets in an attempt to de-risk their own portfolios.[8]

Losses in investment banking arm

Between 2008 and 2023, Credit Suisse's investment banking arm underperformed, dragging down the business's profitability and causing significant losses.[8] The bank suffered from a series of scandals and mismanagement, including losses in its investment arm associated with the collapses of Archegos Capital and Greensill Capital in 2021.[10] The bank's internal control over financial reporting was flagged by its auditor, PwC, for the period 2020 to 2022.[11]

March 2023 United States bank failures and contagion

Further information: March 2023 United States bank failures
 
Switzerland bonds
Inverted yield curve in 2023
  30 year
  10 year
  2 year
  1 year
  3 month
  Overnight

Following the March 2023 United States bank failures in the United States, shares in the global banking sector fell sharply. The S&P Banks index declined 22% over two weeks to 18 March. The U.S. bank failures caused wider concern over pressure on the sector from interest rate hikes by the Federal Reserve and other central banks.[12]

Saudi National Bank (SNB) was Credit Suisse's largest shareholder, with almost 10%. On Wednesday, 15 March, when Bloomberg Television asked SNB chairman Ammar Al Khudairy whether his firm might further invest in Credit Suisse, he replied "The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory", adding:[13]

If we go above 10%, all new rules kick in whether it be by our regulator or the Swiss regulator or the European regulator. We're not inclined to get into a new regulatory regime. I can cite five or six other reasons, but one reason is there is a glass ceiling and we're not going to entertain going beyond it.

Although SNB later said that wanting to remain under 10% ownership was its only reason, investors panicked, akin to what happened during the 2010–2011 European debt crisis. Credit Suisse bonds fell by up to 10 cents per euro in the two hours after Al Khudairy's answer,[14] and its stock declined up to 31% that day.[13] Credit Suisse executives were aware that they could not control the stock price, but the bonds becoming distressed securities signaled great concern from the firm's investors and counterparties.[14]

At 1 pm the firm decided to buy back bonds, but needed help.[14] That day Swiss National Bank provided a backstop in the form of emergency line of credit to Credit Suisse of 50 billion Swiss francs ($55 billion).[3] Despite this, daily withdrawals of demand deposits totaled over 10 billion Swiss francs later that same week.[15] One-year credit default swaps for Credit Suisse rose that day from an already alarming 799 bps to 3701 bps, the highest levels for large banks since the 2008 crisis. Market discipline broke down; an investor said that the price was so high that hedging was not possible. Work at Credit Suisse almost stopped, as employees evaded clients' telephone calls and their own staff to avoid questions on the crisis.[14]

While publicly stating that Credit Suisse was healthy, the purpose of the backstop was to give Swiss National Bank and Swiss Financial Market Supervisory Authority (FINMA) time to find a buyer, not for the firm to save itself. They ordered UBS on Wednesday to plan an acquisition as the only alternative to nationalization of Credit Suisse; negotiations began that day. The one-year CDS price remained at 3468 bps on Thursday, signaling that investors doubted the central bank's reassurances.[14] Regulators from the EU, the United States, the United Kingdom, and Switzerland expected that Credit Suisse would have become insolvent in the week beginning 19 March had it not been bailed out or acquired by another bank.[4] U.S. investment management company BlackRock had explored options for acquiring parts of Credit Suisse, but dropped their effort on 17 March.[16]

Negotiations

Negotiations surrounding an acquisition began on 15 March. Swiss authorities knew that a deal had to be done before Monday, 20 March, to help prevent the panic from spreading around the world. Issues discussed during the short negotiation period included UBS not wanting Credit Suisse's unprofitable investment bank, antitrust issues from combining Switzerland's two largest banks, the size of a government backstop, and whether to bypass shareholder votes. Swiss National Bank chairman Thomas Jordan led the negotiation, mostly excluding Credit Suisse management.[14]

On the morning of 19 March, UBS made an offer of 0.25 Swiss francs ($0.27) per share, valuing Credit Suisse at around $1 billion, but SNB urged rejecting the offer; believing that the price was too low, it was rejected by Credit Suisse's board. Credit Suisse contacted Deutsche Bank and others, but there was not enough time for another buyer. That afternoon, UBS countered with an offer of 0.50 Swiss francs ($0.55) per share, valuing Credit Suisse at just over $2 billion.[3][14] The final deal to purchase Credit Suisse for CHF 3 billion ($3.2 billion) was accepted by the board of Credit Suisse prior to the opening of Asian financial markets on Monday morning. The acquisition was an all-stock deal, with Credit Suisse shareholders receiving 1 UBS share per 22.48 Credit Suisse shares.[1][17][18] The price was 1% of Credit Suisse's all-time high value in 2007.[19]

Acquisition

The acquisition was coordinated by the Swiss government, led by the Federal Department of Finance, Swiss National Bank, and FINMA. In an emergency meeting on 19 March 2023, the Swiss Federal Council exercised emergency powers to allow the merger to take place without the approval of shareholders, and to provide Credit Suisse with additional liquidity assistance privileged against bankruptcy and backed by a governmental default guarantee. In addition, the Federal Council granted UBS a guarantee worth CHF 9 billion ($9.6 billion) for potential losses from risks associated with the transaction, after approval by a parliamentary committee.[20] As part of the deal, CHF 16 billion ($17.2 billion) of Additional Tier 1 bonds (AT1) were written down to zero on FINMA's authorization – the largest writedown of AT1 debt so far. The move forced larger losses on bondholders than on shareholders of Credit Suisse.[5][21]

President of Switzerland Alain Berset, Minister of Finance Karin Keller-Sutter, and Chairman Jordan announced the acquisition in a 19 March 2023 press conference, alongside the chairmen of UBS and CS.[22][23] The government said that its exposure to risk was low, and that it considered the acquisition necessary for financial market stability in Switzerland and globally.[20]

UBS Chairman Colm Kelleher stated that UBS did not initiate discussions, although he added that the company considered the transaction "financially attractive for UBS shareholders".[24] He further added that the deal was an "emergency rescue".[1]

Reactions

The financial market authorities of the European Union and the United States issued statements in approval of the acquisition.[25][3] Analysts have described the acquisition as a "shotgun wedding" arranged by the Swiss government.[26]

Noting that Credit Suisse had been facing problems for several years, senior editor for CNN Business Allison Morrow stated, "[Silicon Valley Bank and Credit Suisse are] facing unrelated problems that happened to take place at the same time, worrying investors about the banking sector".[27]

In Swiss politics, Keller-Sutter's center-right Free Democratic Party approved of the government's intervention with regret, while the right-wing Swiss People's Party and the left-wing Social Democratic Party of Switzerland reacted with anger, denouncing "cronyism" and demanding that those responsible be held to account.[25]

Analysts have warned that UBS-Credit Suisse deal could extend rather than end the banking crisis, mainly because of the write-off of AT1 bonds worth CHF 16 billion. AJ Bell investment director Russ Mould said: "It means the banking crisis we've seen over the past few weeks has started a new chapter rather than reaching its ending."[28] According to the Bank of England, "clear statutory order" existed for bank resolutions, in that which AT1 holders would be exposed to losses after equity investors.[29]

Impact

The combined entity will continue to be led by UBS CEO Ralph Hamers and chairman Colm Kelleher.[22] Kelleher said that the deal would take a few weeks to close, and that UBS intends to engage in "de-risking" the "tricky businesses" run by Credit Suisse.[30] He said that Credit Suisse would continue to operate as normal until the closing of the merger, and that nothing could yet be said about the merger's impact on Credit Suisse's employees.[23] As part of the deal, UBS will wind down Credit Suisse's investment bank.[31]

Credit Suisse's largest shareholders, including SNB (9.9% stake) and sovereign wealth funds Qatar Investment Authority (6.8% stake) and Norges Bank Investment Management, are expected to take significant losses from the acquisition.[32][28]

Other Swiss banks prepared to succeed Credit Suisse as the country's second-largest. Zurich Cantonal Bank CEO Urs Baumann said that his firm "offers all business areas of a universal bank and is thus a complement to the newly emerging big bank".[33]

The takeover resulted in $17 billion of Credit Suisse-issued bonds being written off as worthless. This undermines the creditworthiness of the newly acquired bank. Property rights have also been seriously weakened in Switzerland because the transaction bypassed any shareholders' statutory approval.[34]

According to BAK Economics, a Swiss economic research and consulting institute, 9,500 to 12,000 jobs are threatened in Switzerland, with job losses in Zurich estimated at between 6,500 and 8,000 FTEs.[35]

See also

References

  1. ^ a b c d Capoot, Ashley (19 March 2023). "UBS buys Credit Suisse for $3.2 billion as regulators look to shore up the global banking system". CNBC. from the original on 19 March 2023. Retrieved 19 March 2023.
  2. ^ Halftermeyer, Marion; Bazelou, Myriam (19 March 2023). "UBS Agrees to Buy Credit Suisse in Historic Deal to End Crisis". Bloomberg News. from the original on 19 March 2023. Retrieved 19 March 2023.
  3. ^ a b c d Massoudi, Arash; Morris, Stephen; Fontanella-Khan, James; Noonan, Laura; Walker, Owen (19 March 2023). "UBS agrees to buy Credit Suisse for more than $2bn". Financial Times. from the original on 19 March 2023. Retrieved 19 March 2023.
  4. ^ a b Patrick, Margot; Dummett, Ben; Cimilluca, Dana; Kowsmann, Patricia (19 March 2023). "UBS Agrees to Buy Credit Suisse for More Than $3 Billion". The Wall Street Journal. from the original on 19 March 2023. Retrieved 19 March 2023.
  5. ^ a b "Holders of $17bn of Credit Suisse bonds wiped out under UBS takeover". Financial Times. 19 March 2023. from the original on 19 March 2023. Retrieved 19 March 2023.
  6. ^ a b "Central banks announce dollar liquidity measures to ease banking crisis". Financial Times. 19 March 2023. from the original on 19 March 2023. Retrieved 19 March 2023.
  7. ^ "UBS to buy Credit Suisse for nearly $3.25B to calm turmoil". AP NEWS. 19 March 2023. from the original on 19 March 2023. Retrieved 19 March 2023.
  8. ^ a b c d Wallace, Joe; Brown, Elliot (19 March 2023). "Credit Suisse, the Risk-Taking Swiss Banking Giant, Succumbs to Crisis". The Wall Street Journal. from the original on 20 March 2023. Retrieved 20 March 2023.
  9. ^ Cimilluca, Dana (17 October 2008). "Swiss Move to Back Troubled UBS". The Wall Street Journal. from the original on 3 December 2022. Retrieved 20 March 2023.
  10. ^ Daga, Anshuman (18 March 2023). "What happened at Credit Suisse and how did it reach crisis point?". Reuters. from the original on 18 March 2023. Retrieved 20 March 2023.
  11. ^ Illien, Noele; Spezzati, Stefania (14 March 2023). "Credit Suisse flags 'material weaknesses' in reporting, outflows not reversed". Reuters. from the original on 17 March 2023. Retrieved 20 March 2023.
  12. ^ Spezzati, Stefania; Hirt, Oliver; O'Donnell, John (18 March 2023). "UBS seeks $6 billion in government guarantees for Credit Suisse takeover". Reuters. from the original on 18 March 2023. Retrieved 19 March 2023.
  13. ^ a b El-Din, Yousef Gamal; Halftermeyer, Marion (15 March 2023). "Credit Suisse Top Holder Rules Out Investing More After Drop". Bloomberg. from the original on 16 March 2023. Retrieved 19 March 2023.
  14. ^ a b c d e f g Halftermeyer, Marion; Nair, Dinesh; Ramnarayan, Abhinav; Foerster, Jan-Henrik; Tan, Gillian (20 March 2023). "Credit Suisse's Fate Was Sealed by Regulators Days Before UBS Deal". Bloomberg. Retrieved 20 March 2023.
  15. ^ Barr, Colin (16 March 2023). "Credit Suisse Will Borrow Up to $53.7 Billion". The Wall Street Journal. from the original on 16 March 2023. Retrieved 19 March 2023.
  16. ^ "BlackRock explored rival Credit Suisse takeover bid". Financial Times. 19 March 2023. from the original on 19 March 2023. Retrieved 20 March 2023.
  17. ^ "Credit Suisse and UBS to Merge". Credit Suisse. 19 March 2023. Retrieved 21 March 2023.
  18. ^ "UBS to acquire Credit Suisse". UBS Global. 19 March 2023. Retrieved 21 March 2023.
  19. ^ Nair, Adveith (20 March 2023). "Credit Suisse Deal Hands Top Holder $1 Billion Investment Loss". Bloomberg News.
  20. ^ a b "Safeguarding financial market stability: Federal Council welcomes and supports UBS takeover of Credit Suisse". Press release of the Swiss Federal Council. 19 March 2023. from the original on 19 March 2023. Retrieved 19 March 2023.
  21. ^ Langley, William; Leng, Cheng; Lewis, Leo; Hale, Thomas (19 March 2023). "Asian bank debt and shares fall after $17bn Credit Suisse bond writedown". Financial Times. from the original on 20 March 2023. Retrieved 20 March 2023.
  22. ^ a b Allen, Matthew (19 March 2023). "Credit Suisse agrees to CHF3bn takeover by rival Swiss bank UBS". Swissinfo. from the original on 19 March 2023. Retrieved 19 March 2023.
  23. ^ a b "Ticker zur Krise bei der Credit Suisse". Der Bund (in German). 19 March 2023. from the original on 19 March 2023. Retrieved 19 March 2023.
  24. ^ Spezzati, Stefania; Murdoch, Scott; Westbrook, Tom; Murdoch, Scott (20 March 2023). "Credit Suisse takeover, central bank action calm jittery markets". Reuters. from the original on 20 March 2023. Retrieved 20 March 2023.
  25. ^ a b "Ende der Credit Suisse – "Eine Schande für die Schweiz" – die ersten Reaktionen". Der Bund (in German). 19 March 2023. from the original on 20 March 2023. Retrieved 19 March 2023.
  26. ^ "Swiss banking giants combine to quell growing global bank crisis". Washington Post. 19 March 2023. from the original on 20 March 2023. Retrieved 20 March 2023.
  27. ^ Zachary B. Wolf (15 March 2023). "Banks suffer crisis of coincidence". CNN. from the original on 17 March 2023. Retrieved 20 March 2023.
  28. ^ a b Glover, George (20 March 2023). "Credit Suisse rescue: The biggest winners and losers from UBS's historic deal". Markets Insider. from the original on 20 March 2023. Retrieved 20 March 2023 – via MSN.
  29. ^ Asgari, Nikou; Agnew, Harriet; Dunkley, Emma; Martin, Katie (20 March 2023). "Credit Suisse bondholders in uproar over $17bn debt wipeout". Financial Times. from the original on 20 March 2023. Retrieved 20 March 2023.
  30. ^ Halftermeyer, Marion; Balezou, Myriam (19 March 2023). "UBS Vows to Shrink 'Tricky' Credit Suisse Investment Bank". Bloomberg.com. Retrieved 19 March 2023.
  31. ^ Spezzati, Stefania; Hirt, Oliver; O'Donnell, John (19 March 2023). "Central banks try to calm markets after UBS deal to buy Credit Suisse". Reuters. from the original on 20 March 2023. Retrieved 20 March 2023.
  32. ^ Goldstein, Steve (19 March 2023). "Saudis, Qataris and Norway to see big losses on UBS deal for Credit Suisse". MarketWatch. from the original on 20 March 2023. Retrieved 20 March 2023.
  33. ^ Sims, Tom; Revill, John (20 March 2023). "Switzerland wakes to new era after historic bank merger; employees 'shocked'". Reuters. from the original on 20 March 2023. Retrieved 20 March 2023.
  34. ^ Allen, Matthew (20 March 2023). "Credit Suisse collapse: consequences and open questions". Swissinfo. from the original on 20 March 2023. Retrieved 20 March 2023.
  35. ^ "Rachat de Credit Suisse: 9500 à 12.000 postes sont menacés en Suisse". Agefi (in French). Retrieved 20 March 2023.

March 21, 2023
acquisition, credit, suisse, this, article, documents, ongoing, major, bank, acquisition, information, change, rapidly, event, progresses, initial, news, reports, unreliable, latest, updates, this, article, reflect, most, current, information, feel, free, impr. This article documents an ongoing major bank acquisition Information may change rapidly as the event progresses and initial news reports may be unreliable The latest updates to this article may not reflect the most current information Feel free to improve this article or discuss changes on the talk page but please note that updates without valid and reliable references will be removed March 2023 Learn how and when to remove this template message On 19 March 2023 Swiss investment bank UBS Group AG agreed to buy Credit Suisse for CHF 3 billion US 3 2 billion in an all stock deal brokered by the government of Switzerland and the Swiss Financial Market Supervisory Authority 1 2 3 The Swiss National Bank supported the deal with an offer to provide up to CHF 100 billion US 104 billion in liquidity to UBS following its takeover of Credit Suisse s operations 4 while the Swiss government provided a guarantee to UBS to cover losses of up to CHF 9 billion 9 6 billion over the short term 1 Additionally CHF 16 billion US 17 2 billion of Additional Tier 1 bonds were written down to zero 5 Acquisition of Credit Suisse by UBSInitiatorUBSTargetCredit SuisseTypeAll stock full acquisitionCostCHF 3 billion US 3 2 billion Initiated19 March 2023Credit Suisse is a globally systemically important bank whose investment banking unit First Boston had been recently tarnished by a series of high profile scandals The banking crisis in the United States had caused fear among global investors and led to panic over other possibly troubled banks Credit Suisse s share price plunged after the leading shareholder ruled out further investment into the bank due to regulatory issues 6 The deal was rapidly agreed upon and announced just before the Asian financial markets opened on Monday morning in order to prevent market shaking turmoil in the global financial markets 7 Soon after central banks across the world announced USD liquidity measures to try and ease wider market panic and avoid a wider banking crisis 6 Contents 1 Background 1 1 Credit Suisse and the global financial crisis 1 2 Losses in investment banking arm 1 3 March 2023 United States bank failures and contagion 2 Negotiations 3 Acquisition 3 1 Reactions 4 Impact 5 See also 6 ReferencesBackground EditCredit Suisse and the global financial crisis Edit Credit Suisse was founded in July 1856 Over the years the bank grew to a massive size competing directly with other bulge bracket firms such as Goldman Sachs and Barclays During the 2007 2008 financial crisis Credit Suisse found itself in better financial shape compared to its peer banks 8 while Swiss National Bank the central bank stepped in to rescue UBS after no private investor was willing to do so by purchasing of 60 billion of toxic assets and 5 3 billion in shares of stock from UBS as a form of a capital infusion Credit Suisse raised a far smaller 9 billion privately from investors to shore up its financial position 9 In the years following the financial crisis the bank continued to have a high appetite for risk while its global peers became more averse to risk 8 Credit Suisse kept its investment banking arm in the immediate years following the crisis an arm that took risks aggressively in order to compete with large U S financial institutions though many large U S banks and its Swiss counterpart UBS chose to pursue more conservative strategies and sold off riskier assets in an attempt to de risk their own portfolios 8 Losses in investment banking arm Edit Between 2008 and 2023 Credit Suisse s investment banking arm underperformed dragging down the business s profitability and causing significant losses 8 The bank suffered from a series of scandals and mismanagement including losses in its investment arm associated with the collapses of Archegos Capital and Greensill Capital in 2021 10 The bank s internal control over financial reporting was flagged by its auditor PwC for the period 2020 to 2022 11 March 2023 United States bank failures and contagion Edit Further information March 2023 United States bank failures Switzerland bonds Inverted yield curve in 2023 30 year 10 year 2 year 1 year 3 month Overnight Following the March 2023 United States bank failures in the United States shares in the global banking sector fell sharply The S amp P Banks index declined 22 over two weeks to 18 March The U S bank failures caused wider concern over pressure on the sector from interest rate hikes by the Federal Reserve and other central banks 12 Saudi National Bank SNB was Credit Suisse s largest shareholder with almost 10 On Wednesday 15 March when Bloomberg Television asked SNB chairman Ammar Al Khudairy whether his firm might further invest in Credit Suisse he replied The answer is absolutely not for many reasons outside the simplest reason which is regulatory and statutory adding 13 If we go above 10 all new rules kick in whether it be by our regulator or the Swiss regulator or the European regulator We re not inclined to get into a new regulatory regime I can cite five or six other reasons but one reason is there is a glass ceiling and we re not going to entertain going beyond it Although SNB later said that wanting to remain under 10 ownership was its only reason investors panicked akin to what happened during the 2010 2011 European debt crisis Credit Suisse bonds fell by up to 10 cents per euro in the two hours after Al Khudairy s answer 14 and its stock declined up to 31 that day 13 Credit Suisse executives were aware that they could not control the stock price but the bonds becoming distressed securities signaled great concern from the firm s investors and counterparties 14 At 1 pm the firm decided to buy back bonds but needed help 14 That day Swiss National Bank provided a backstop in the form of emergency line of credit to Credit Suisse of 50 billion Swiss francs 55 billion 3 Despite this daily withdrawals of demand deposits totaled over 10 billion Swiss francs later that same week 15 One year credit default swaps for Credit Suisse rose that day from an already alarming 799 bps to 3701 bps the highest levels for large banks since the 2008 crisis Market discipline broke down an investor said that the price was so high that hedging was not possible Work at Credit Suisse almost stopped as employees evaded clients telephone calls and their own staff to avoid questions on the crisis 14 While publicly stating that Credit Suisse was healthy the purpose of the backstop was to give Swiss National Bank and Swiss Financial Market Supervisory Authority FINMA time to find a buyer not for the firm to save itself They ordered UBS on Wednesday to plan an acquisition as the only alternative to nationalization of Credit Suisse negotiations began that day The one year CDS price remained at 3468 bps on Thursday signaling that investors doubted the central bank s reassurances 14 Regulators from the EU the United States the United Kingdom and Switzerland expected that Credit Suisse would have become insolvent in the week beginning 19 March had it not been bailed out or acquired by another bank 4 U S investment management company BlackRock had explored options for acquiring parts of Credit Suisse but dropped their effort on 17 March 16 Negotiations EditNegotiations surrounding an acquisition began on 15 March Swiss authorities knew that a deal had to be done before Monday 20 March to help prevent the panic from spreading around the world Issues discussed during the short negotiation period included UBS not wanting Credit Suisse s unprofitable investment bank antitrust issues from combining Switzerland s two largest banks the size of a government backstop and whether to bypass shareholder votes Swiss National Bank chairman Thomas Jordan led the negotiation mostly excluding Credit Suisse management 14 On the morning of 19 March UBS made an offer of 0 25 Swiss francs 0 27 per share valuing Credit Suisse at around 1 billion but SNB urged rejecting the offer believing that the price was too low it was rejected by Credit Suisse s board Credit Suisse contacted Deutsche Bank and others but there was not enough time for another buyer That afternoon UBS countered with an offer of 0 50 Swiss francs 0 55 per share valuing Credit Suisse at just over 2 billion 3 14 The final deal to purchase Credit Suisse for CHF 3 billion 3 2 billion was accepted by the board of Credit Suisse prior to the opening of Asian financial markets on Monday morning The acquisition was an all stock deal with Credit Suisse shareholders receiving 1 UBS share per 22 48 Credit Suisse shares 1 17 18 The price was 1 of Credit Suisse s all time high value in 2007 19 Acquisition EditThe acquisition was coordinated by the Swiss government led by the Federal Department of Finance Swiss National Bank and FINMA In an emergency meeting on 19 March 2023 the Swiss Federal Council exercised emergency powers to allow the merger to take place without the approval of shareholders and to provide Credit Suisse with additional liquidity assistance privileged against bankruptcy and backed by a governmental default guarantee In addition the Federal Council granted UBS a guarantee worth CHF 9 billion 9 6 billion for potential losses from risks associated with the transaction after approval by a parliamentary committee 20 As part of the deal CHF 16 billion 17 2 billion of Additional Tier 1 bonds AT1 were written down to zero on FINMA s authorization the largest writedown of AT1 debt so far The move forced larger losses on bondholders than on shareholders of Credit Suisse 5 21 President of Switzerland Alain Berset Minister of Finance Karin Keller Sutter and Chairman Jordan announced the acquisition in a 19 March 2023 press conference alongside the chairmen of UBS and CS 22 23 The government said that its exposure to risk was low and that it considered the acquisition necessary for financial market stability in Switzerland and globally 20 UBS Chairman Colm Kelleher stated that UBS did not initiate discussions although he added that the company considered the transaction financially attractive for UBS shareholders 24 He further added that the deal was an emergency rescue 1 Reactions Edit The financial market authorities of the European Union and the United States issued statements in approval of the acquisition 25 3 Analysts have described the acquisition as a shotgun wedding arranged by the Swiss government 26 Noting that Credit Suisse had been facing problems for several years senior editor for CNN Business Allison Morrow stated Silicon Valley Bank and Credit Suisse are facing unrelated problems that happened to take place at the same time worrying investors about the banking sector 27 In Swiss politics Keller Sutter s center right Free Democratic Party approved of the government s intervention with regret while the right wing Swiss People s Party and the left wing Social Democratic Party of Switzerland reacted with anger denouncing cronyism and demanding that those responsible be held to account 25 Analysts have warned that UBS Credit Suisse deal could extend rather than end the banking crisis mainly because of the write off of AT1 bonds worth CHF 16 billion AJ Bell investment director Russ Mould said It means the banking crisis we ve seen over the past few weeks has started a new chapter rather than reaching its ending 28 According to the Bank of England clear statutory order existed for bank resolutions in that which AT1 holders would be exposed to losses after equity investors 29 Impact EditThe combined entity will continue to be led by UBS CEO Ralph Hamers and chairman Colm Kelleher 22 Kelleher said that the deal would take a few weeks to close and that UBS intends to engage in de risking the tricky businesses run by Credit Suisse 30 He said that Credit Suisse would continue to operate as normal until the closing of the merger and that nothing could yet be said about the merger s impact on Credit Suisse s employees 23 As part of the deal UBS will wind down Credit Suisse s investment bank 31 Credit Suisse s largest shareholders including SNB 9 9 stake and sovereign wealth funds Qatar Investment Authority 6 8 stake and Norges Bank Investment Management are expected to take significant losses from the acquisition 32 28 Other Swiss banks prepared to succeed Credit Suisse as the country s second largest Zurich Cantonal Bank CEO Urs Baumann said that his firm offers all business areas of a universal bank and is thus a complement to the newly emerging big bank 33 The takeover resulted in 17 billion of Credit Suisse issued bonds being written off as worthless This undermines the creditworthiness of the newly acquired bank Property rights have also been seriously weakened in Switzerland because the transaction bypassed any shareholders statutory approval 34 According to BAK Economics a Swiss economic research and consulting institute 9 500 to 12 000 jobs are threatened in Switzerland with job losses in Zurich estimated at between 6 500 and 8 000 FTEs 35 See also EditBanking in SwitzerlandReferences Edit a b c d Capoot Ashley 19 March 2023 UBS buys Credit Suisse for 3 2 billion as regulators look to shore up the global banking system CNBC Archived from the original on 19 March 2023 Retrieved 19 March 2023 Halftermeyer Marion Bazelou Myriam 19 March 2023 UBS Agrees to Buy Credit Suisse in Historic Deal to End Crisis Bloomberg News Archived from the original on 19 March 2023 Retrieved 19 March 2023 a b c d Massoudi Arash Morris Stephen Fontanella Khan James Noonan Laura Walker Owen 19 March 2023 UBS agrees to buy Credit Suisse for more than 2bn Financial Times Archived from the original on 19 March 2023 Retrieved 19 March 2023 a b Patrick Margot Dummett Ben Cimilluca Dana Kowsmann Patricia 19 March 2023 UBS Agrees to Buy Credit Suisse for More Than 3 Billion The Wall Street Journal Archived from the original on 19 March 2023 Retrieved 19 March 2023 a b Holders of 17bn of Credit Suisse bonds wiped out under UBS takeover Financial Times 19 March 2023 Archived from the original on 19 March 2023 Retrieved 19 March 2023 a b Central banks announce dollar liquidity measures to ease banking crisis Financial Times 19 March 2023 Archived from the original on 19 March 2023 Retrieved 19 March 2023 UBS to buy Credit Suisse for nearly 3 25B to calm turmoil AP NEWS 19 March 2023 Archived from the original on 19 March 2023 Retrieved 19 March 2023 a b c d Wallace Joe Brown Elliot 19 March 2023 Credit Suisse the Risk Taking Swiss Banking Giant Succumbs to Crisis The Wall Street Journal Archived from the original on 20 March 2023 Retrieved 20 March 2023 Cimilluca Dana 17 October 2008 Swiss Move to Back Troubled UBS The Wall Street Journal Archived from the original on 3 December 2022 Retrieved 20 March 2023 Daga Anshuman 18 March 2023 What happened at Credit Suisse and how did it reach crisis point Reuters Archived from the original on 18 March 2023 Retrieved 20 March 2023 Illien Noele Spezzati Stefania 14 March 2023 Credit Suisse flags material weaknesses in reporting outflows not reversed Reuters Archived from the original on 17 March 2023 Retrieved 20 March 2023 Spezzati Stefania Hirt Oliver O Donnell John 18 March 2023 UBS seeks 6 billion in government guarantees for Credit Suisse takeover Reuters Archived from the original on 18 March 2023 Retrieved 19 March 2023 a b El Din Yousef Gamal Halftermeyer Marion 15 March 2023 Credit Suisse Top Holder Rules Out Investing More After Drop Bloomberg Archived from the original on 16 March 2023 Retrieved 19 March 2023 a b c d e f g Halftermeyer Marion Nair Dinesh Ramnarayan Abhinav Foerster Jan Henrik Tan Gillian 20 March 2023 Credit Suisse s Fate Was Sealed by Regulators Days Before UBS Deal Bloomberg Retrieved 20 March 2023 Barr Colin 16 March 2023 Credit Suisse Will Borrow Up to 53 7 Billion The Wall Street Journal Archived from the original on 16 March 2023 Retrieved 19 March 2023 BlackRock explored rival Credit Suisse takeover bid Financial Times 19 March 2023 Archived from the original on 19 March 2023 Retrieved 20 March 2023 Credit Suisse and UBS to Merge Credit Suisse 19 March 2023 Retrieved 21 March 2023 UBS to acquire Credit Suisse UBS Global 19 March 2023 Retrieved 21 March 2023 Nair Adveith 20 March 2023 Credit Suisse Deal Hands Top Holder 1 Billion Investment Loss Bloomberg News a b Safeguarding financial market stability Federal Council welcomes and supports UBS takeover of Credit Suisse Press release of the Swiss Federal Council 19 March 2023 Archived from the original on 19 March 2023 Retrieved 19 March 2023 Langley William Leng Cheng Lewis Leo Hale Thomas 19 March 2023 Asian bank debt and shares fall after 17bn Credit Suisse bond writedown Financial Times Archived from the original on 20 March 2023 Retrieved 20 March 2023 a b Allen Matthew 19 March 2023 Credit Suisse agrees to CHF3bn takeover by rival Swiss bank UBS Swissinfo Archived from the original on 19 March 2023 Retrieved 19 March 2023 a b Ticker zur Krise bei der Credit Suisse Der Bund in German 19 March 2023 Archived from the original on 19 March 2023 Retrieved 19 March 2023 Spezzati Stefania Murdoch Scott Westbrook Tom Murdoch Scott 20 March 2023 Credit Suisse takeover central bank action calm jittery markets Reuters Archived from the original on 20 March 2023 Retrieved 20 March 2023 a b Ende der Credit Suisse Eine Schande fur die Schweiz die ersten Reaktionen Der Bund in German 19 March 2023 Archived from the original on 20 March 2023 Retrieved 19 March 2023 Swiss banking giants combine to quell growing global bank crisis Washington Post 19 March 2023 Archived from the original on 20 March 2023 Retrieved 20 March 2023 Zachary B Wolf 15 March 2023 Banks suffer crisis of coincidence CNN Archived from the original on 17 March 2023 Retrieved 20 March 2023 a b Glover George 20 March 2023 Credit Suisse rescue The biggest winners and losers from UBS s historic deal Markets Insider Archived from the original on 20 March 2023 Retrieved 20 March 2023 via MSN Asgari Nikou Agnew Harriet Dunkley Emma Martin Katie 20 March 2023 Credit Suisse bondholders in uproar over 17bn debt wipeout Financial Times Archived from the original on 20 March 2023 Retrieved 20 March 2023 Halftermeyer Marion Balezou Myriam 19 March 2023 UBS Vows to Shrink Tricky Credit Suisse Investment Bank Bloomberg com Retrieved 19 March 2023 Spezzati Stefania Hirt Oliver O Donnell John 19 March 2023 Central banks try to calm markets after UBS deal to buy Credit Suisse Reuters Archived from the original on 20 March 2023 Retrieved 20 March 2023 Goldstein Steve 19 March 2023 Saudis Qataris and Norway to see big losses on UBS deal for Credit Suisse MarketWatch Archived from the original on 20 March 2023 Retrieved 20 March 2023 Sims Tom Revill John 20 March 2023 Switzerland wakes to new era after historic bank merger employees shocked Reuters Archived from the original on 20 March 2023 Retrieved 20 March 2023 Allen Matthew 20 March 2023 Credit Suisse collapse consequences and open questions Swissinfo Archived from the original on 20 March 2023 Retrieved 20 March 2023 Rachat de Credit Suisse 9500 a 12 000 postes sont menaces en Suisse Agefi in French Retrieved 20 March 2023 Retrieved from https en wikipedia org w index php title Acquisition of Credit Suisse by UBS amp oldid 1145837850, wikipedia, wiki, book, books, library,

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