THURSDAY, March 28, 2024
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UBS to buy Credit Suisse in Swiss-assisted bid to calm markets

UBS to buy Credit Suisse in Swiss-assisted bid to calm markets

UBS will buy rival Swiss bank Credit Suisse for 3 billion Swiss francs ($3.23 billion) and agreed to assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities on Sunday to avoid further market-shaking turmoil in global banking.

Swiss regulators were forced to step in and orchestrate a deal to prevent a crisis of confidence in Credit Suisse from spilling over into the broader financial system. The deal is expected to close by the end of 2023.

The deal was welcomed by US Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powel, European Central Bank President Christine Lagarde and Britain's Finance Minister Jeremy Hunt.

The Swiss banking marriage follows efforts in Europe and the United States to support the sector since the collapse of US lenders Silicon Valley Bank and Signature Bank.

The Swiss finance minister said the bankruptcy of a globally important bank would have created irreparable consequences for financial markets.

It was not yet clear if the deal is enough to restore trust in lenders around the world. 

The Swiss central bank said the deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse.

The effect on jobs was not immediately clear.

UBS Chair Colm Kelleher said during a press conference he was “pleased” and that “UBS will remain rock solid.”

Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held, equivalent to 0.76 Swiss francs per share for a total consideration of 3 billion francs, UBS said.

Fed, other central banks set joint liquidity operation

The US Federal Reserve on Sunday said it had joined with the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank in a coordinated action to enhance the provision of liquidity through the standing US dollar swap line arrangements.

The move came on the heels of a deal brokered by Swiss authorities to have UBS buy rival Swiss bank Credit Suisse to prevent its disorderly collapse and signals the depth of concern central bankers have over the recent turmoil in the financial system on both sides of the Atlantic.

Asia stocks steady as Credit Suisse buyout brings relief

Asian stocks steadied on Monday in relief at a weekend rescue deal for Credit Suisse and a concerted effort from central banks to shore up the mood, though trade was tense and volatile as contagion fears stalked financial shares.

Japan's benchmark Nikkei 225 fell 0.2% after opening at 27,253.73 in the morning.

Australian shares opened the week lower on Monday, in line with global markets as liquidity concerns in the banking sector soured risk appetite, with financials leading losses.

The S&P/ASX 200 index fell 0.8% to 6,938.60 by 2330 GMT Sunday.

South Korea's benchmark Korea Composite Stock Price Index (KOSPI) rose 0.14 %, to 2,399.03 in the morning.

Reuters

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