Swiss President Alain Berset announced Sunday, the news that the bank UBS had acquired its smaller competitor Credit Suisse, in an attempt to halt the development of the banking crisis and contain it to prevent further turmoil that is shaking the banking sector on a global scale.
Credit Suisse is classified by the Financial Stability Board, an international body that monitors the global financial system, as an important bank globally, which means that experts believe its disorderly collapse will lead to shockwaves throughout the financial system very similar to the collapse of Lehman. Brothers 15 years ago.
The UBS bank agreed to buy its smaller competitor, Credit Suisse, after raising, the latter raised its offer to three billion Swiss francs, equivalent to three billion and 166 million dollars as the official price of the acquisition. The Swiss government agreed to provide a $100 billion liquidity line to the two banks to help secure and accelerate the deal.
Credit Suisse has long been struggling with investors, leading to a disaster, last Wednesday, when the bank’s shares reached a historic low of 1.55 Swiss francs (1.56 euros). General confidence in the bank fell dramatically ever since the fall of the Silicon Valley Bank as well as Credit Suisse’s own confession of mismanaging bookkeeps. According to the Financial Times, the bank's customers withdrew 10 billion Swiss francs in deposits in a single day late last week, despite it receiving a 50 billion Swiss francs loan from the Swiss central bank.
The UBS acquisition is seen as an "urgent and a rapid offer". The offer was greatly welcomed around the world, as The European Central Bank, represented by its president Christine Lagarde, said Sunday that the rescue of the Swiss bank "Credit Suisse" was necessary to appease the financial markets, and that it remains ready to support the banks of the euro area with loans if necessary. Swiss Finance Minister Karin Keller-Sutter declared at a press conference that the bankruptcy of Credit Suisse would have caused "irreparable economic damage" it is necessary to note that this irreparable economic damage would have a worldwide effect, and even this acquisition caused damage, as the Saudi National Bank lost a 1-Billion-dollar investment in Credit Suisse (almost 80% of the investment). The Swiss minister continued, "Therefore, Switzerland must carry out its responsibilities beyond its borders."
An anonymous source had said to Reuters earlier that 10,000 jobs might have to be cut if the two banks were merged. These job cuts have come in addition to the 9,000 job cuts that Credit Suisse did in a bid to save itself even before it was forced into crisis negotiations on Sunday. Bloomberg News stated on Sunday, quoting sources familiar with the negotiations - that this number of jobs is just the beginning if the bank is pushed into an acquisition deal by "UBS", while one of the sources estimated that the final outcome of writing off jobs could be many times more that number.
Switzerland sent a message of reassurance to the global markets, through its support for the acquisition of the Swiss bank “Credit Suisse” by the bank “UBS”, so stock markets rose around the world, after the fears of the extension and spread of the American banking crisis were addressed, and the Dow Jones Industrial Average added 382 points to its worth.
Edited by : Ritaja Kar
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