Swiss banking giant UBS will purchase struggling rival Credit Suisse in a $3 billion government-supported deal.
Switzerland’s central bank announced the takeover Sunday (March 19), saying the move would restore confidence in the financial system after nine days of unease around the banking sector. The Swiss National Bank also says it is offering UBS a $108 billion liquidity assistance loan.
“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the central bank said in its announcement.
According to an announcement from UBS, the all-stock deal is worth about 3 billion Swiss francs, or $3.2 billion.
“Most importantly, the merger will be implemented without the otherwise necessary approval of the shareholders of UBS and Credit Suisse to enhance deal certainty,” Credit Suisse said in a news release Sunday.
Related: UBS, Credit Suisse Oppose Idea Of Forced Combination
“Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome,” Axel P. Lehmann, chairman of the board of directors of Credit Suisse said in the release.
Credit Suisse, founded in 1856, saw its shares shed a quarter of their value last week. The bank was forced to seek a $54 billion central bank loan that did little to restore investor confidence.
Alain Berset, president of the Swiss Confederation, said during a news conference announcing the deal that the government supported the purchase after it became clear last week that it was no longer possible to restore confidence in Credit Suisse.
He told reporters the government was confident that the deal was the “best solution for restoring the confidence that has been lacking in financial markets lately.”
The UBS-Credit Suisse deal comes as regulators on both sides of the Atlantic are working to restore that confidence.
Last week, President Joe Biden called on Congress to impose harsher penalties on senior bank executives whose mismanagement led to their institutions folding, saying this would add accountability and prevent future mismanagement.
“The law limits the administration’s authority to hold executives responsible,” Biden said. “When banks fail due to mismanagement and excessive risk-taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties and to ban executives from working in the banking industry again.”
Last week also saw 11 American banks band together to rescue smaller lender First Republic, by making $30 billion in uninsured deposits.
“The actions of America’s largest banks reflect their confidence in the country’s banking system,” the banks, which included Bank of America, JPMorgan, Citigroup and Wells Fargo, said in an announcement Thursday (March 16).
“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed most. Smaller- and medium-sized banks support their local customers and businesses, create millions of jobs and help uplift communities.”