UBS (Union Bank of Switzerland) is all set to acquire Credit Suisse for $3.2 Billion. The Swiss Government stepped in to synthesize the deal which is expected to close by the end of 2024 .
UBS bank has agreed to acquire Credit Suisse for $3.2 Billion along with $5.4 Billion in losses. The merger deal has been designed by Swiss authorities to avoid further turbulence in the Swiss market and in the global banking sector. The Swiss authorities were forced to participate in order to control the turmoil in the banking sector. This was done in an attempt to control the confidence crisis in the banking sector. This historic deal is expected to close by the end of 2024.
“Bankruptcy of the globally important bank would have led to irreparable damages for financial markets.”, The Finance Minister of Switzerland said.
It is still unclear whether this deal would successfully shore up investors’ confidence. Reactions are to be noted as Asia’s, Australia’s and New Zealand’s Markets open.
The Swiss Central Bank said that it would “provide enough liquidity” to the merged bank. The statement was recorded in a news conference in the Capital City of Bern. They said that the deal involved “100 Billion Swiss Francs for liquidity assistance to UBS Bank and Credit Suisse.
“As UBS takes over Credit Suisse, a solution has been synthesized to maintain financial stability and protect the Swiss Economy in these tough times.”, The Swiss Central Bank said.
Direct influence of the deal on jobs is still unclear. “UBS aims to save costs by $7 Billion by 2027”, said UBS bank officials. Credit Swiss Shareholders shall receive 1 UBS Share for every 22.48 Credit Suisse shares held. This equals to 0.76 Swiss Francs per share for the total of 3 Billion Francs, said UBS.
The Swiss regulator said that “Additional Tier-1 shares with face value of 16 billion ($17.2 Billion) Francs will be written down” as the Swiss Government provides support.
Senior executives in the knowledge of the deal said that “a few major European banks are examining the scenario and whether it would affect the regional banking sector”. The Federal Reserve and the European Central Bank are being expected to step in with stronger signals of help.
The series of events that includes the fall of the American banking sector and the Credit Suisse episode might show repercussions in the financial markets this week.
European regulators, however, are unwelcome of any such mover as it risks losing investors’ confidence in the entire European region.
The two bank’s fortunes have seen fluctuations in the past one year. While UBS earned $7.6 billion in profits, Credit Suisse lost $7.9 billion in losses. Credit Suisse shares have lost almost ¾ th of their value since last year.
It is to be seen how this deal affects the global financial markets. Credit Suisse’s acquisition by UBS is all set to send ripples in the global financial markets as this deal holds immense importance in the global banking sector, both historically as well as monetarily.
