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UBS, Switzerland's largest bank, has agreed to acquire Credit Suisse, one of its largest rivals, for CHF 3,000 million (USD 3.23 billion). The announcement came after a weekend of intense negotiations between the two banks, the government, the central bank, and the regulatory authority. The Swiss Confederation President, Alain Berset, confirmed the deal and said in a press conference that it is the best way to "restore confidence."
The purchase will be made in UBS shares, at a price of only CHF 0.76 per Credit Suisse share, which is triple the amount offered earlier in the day but significantly below Credit Suisse's Friday closing price of CHF 1.86. The merger of the two banking giants, both of which are among the 30 key banks in the global financial system, is expected to be completed and announced in time for the opening of Asian markets.
UBS will benefit from a government guarantee of about CHF 9,000 million (USD 9.75 billion) as insurance if problems arise, said Finance Minister Karin Keller-Sutter. In addition, the central bank will provide a liquidity line of up to CHF 100,000 million (USD 108,000 million) to UBS and Credit Suisse.
The merger is seen as crucial not only for Switzerland but also for the stability of the entire global financial system. UBS, which took several years to recover from the 2008 financial crisis and a massive government bailout, is starting to reap the rewards of its efforts.
However, it required a lot of effort from the authorities before the bank's management agreed to take on the role of rescuing Credit Suisse. The Swiss banking union "demanded" the participation of social partners in the discussions, given the "enormity" of what is at stake in the acquisition, which could mean the massive loss of jobs.
Credit Suisse's collapse rocked the global financial system last week, as panicked investors dumped their stocks and bonds following the collapse of several smaller US lenders. Under pressure from regulators, UBS must complete its acquisition of its rival, Credit Suisse, by Sunday.