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Swiss Banks Join Forces and Dodge Global Financial Apocalypse with Massive $100 Billion Government Bailout


Credit Suisse, a global investment bank that was in a liquidity crisis, was finally acquired by UBS, Switzerland's largest bank. The total amount of the acquisition is $3.23 billion). The amount is less than half of Credit Suisse's market capitalization ($8 billion as of the 17th), but a dramatic agreement was reached at the negotiating table prepared by Swiss authorities. 


As a result, Credit Suisse, which rejected the Swiss government's bailout after the 2008 global financial crisis, fell into the hands of rival UBS, which revived with the support of the Swiss government at the time, reversing its fate. 


On the 19th, the sale negotiations were difficult. According to foreign media reports, UBS initially offered to acquire Credit Suisse for $1 billion, but Credit Suisse refused, calling it a bargain sale. As a result, there has been news that the Swiss government is even considering nationalizing the entire Credit Suisse bank or only a specific sector. 


However, the acquisition was finally concluded as UBS eventually spent $3.23 billion, three times higher than the original $1 billion. The Credit Suisse crisis, which was feared to cause a big shock to the global financial market, is putting out the urgent fire. 


Analysts say that the merger of Switzerland's two major banks is the result of the Swiss government's active efforts to avoid a global "Black Monday" situation, including providing $100 billion in liquidity support. According to foreign media such as Reuters and Bloomberg on the 19th, the Swiss government and the Swiss National Bank held a press conference and said, "UBS announced the acquisition of Credit Suisse today thanks to the support of the Swiss federal government, the Financial Supervisory Service, and the Swiss National Bank." The Swiss National Bank has also decided to provide liquidity support of up to 100 billion dollars to support the acquisition. The Swiss National Bank said, "By providing substantial liquidity, both banks will be able to access the required liquidity."


On the same day, the Swiss federal government plans to "strengthen financial market stability by providing additional liquidity support until the acquisition is completed." Swiss President Ignazio Cassis said, "UBS's acquisition of Credit Suisse is the best solution to provide trust in the Swiss financial market."


Finance Minister Karin Keller Sutter said, "It is regrettable that Credit Suisse has not improved the situation independently," but said, "The bankruptcy of the world's most important bank would have had irreversible consequences for the global financial market."


It is pointed out that although Switzerland's No. 1 and No. 2 banks seem to overcome the crisis through a merger presided over by Swiss authorities, there are many obstacles to overcome, such as staff cuts. UBS currently employs more than 72,000 employees, and Credit Suisse employs are about 50,000 as of the end of last year. Earlier, foreign media predicted that about 10,000 employees would be cut if the merger was completed. However, foreign media reported that UBS said on the 19th that it was too early to discuss reducing the number of Credit Suisse workers.


Will the 'Bank Crisis' End?


Analysts say that the acquisition agreement of Switzerland's two major banks has passed the big crisis for now, but it is still unclear whether the "bank-initiated crisis" can end. This is because investor anxiety has not disappeared in the U.S. and Europe, the epicenter of the banking crisis.


Moreover, the U.S. and Europe have proposed solutions such as supplying additional liquidity so far, but it is also worrisome that drugs have not worked repeatedly. In the U.S., 11 large banks joined forces to provide funds to small and medium-sized banks, and in Switzerland, the central bank implemented bailouts, but it failed and eventually needed a big surgery to take over by a safe bank.


Some point out that the U.S. Fed needs a fundamental prescription to lower its key interest rate as the high-interest rate march has brought about the global financial market crisis. This means that the banking crisis can also end only when interest rates calm down and global financial markets stabilize. Experts point out that the Fed's Federal Open Market Committee on the 22nd is emerging as a bigger concern about how far the final interest rate will be recorded. There is a high possibility of a baby step (a 0.25% base rate hike) in March.


Edited by Palak Chauhan

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