If UBS acquires Credit Suisse 10,000 jobs may go

UBS was under pressure from the Swiss authorities to carry out a takeover of its local rival to get the crisis under control, two people with knowledge of the matter said. The plan could see Credit Suisse’s Swiss business spun off.

Switzerland is preparing to use emergency measures to fast-track the deal, the Financial Times reported, citing two people familiar with the situation.

US authorities are involved, working with their Swiss counterparts to help broker a deal, Bloomberg News reported, also citing those familiar with the matter.

British finance minister Jeremy Hunt and Bank of England Governor Andrew Bailey are also in regular contact this weekend over the fate of Credit Suisse, a source familiar with the matter said. Spokespeople for the British Treasury and the Bank of England’s Prudential Regulation Authority, which oversees lenders, declined to comment.

Credit Suisse shares lost a quarter of their value in the last week. It was forced to tap $US54 billion in central bank funding as it tries to recover from a string of scandals that have undermined the confidence of investors and clients.

The company ranks among the world’s largest wealth managers and is considered one of 30 global, systemically important banks whose failure would ripple throughout the entire financial system.

The banking sector’s fundamentals are stronger, and the global systemic linkages are weaker than during the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a late Friday note to clients. That limits the risk of a “potential vicious circle of counterparty credit losses,” Karoui said.

“However, a more forceful policy response is likely needed to bring some stability,” Karoui said. The bank said the lack of clarity on Credit Suisse’s future will pressure the broader European banking sector.

A senior official at China’s central bank said on Saturday that high interest rates in the major developed economies could continue to cause problems for the financial system.

There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at the possibility of buying some of its assets, while U.S. financial giant BlackRock denied a report that it was participating in a rival bid for the bank.

The failure of California-based Silicon Valley Bank brought into focus how a relentless campaign of interest rate hikes by the US Federal Reserve and other central banks – including the European Central Bank this week – was pressuring the banking sector. SVB and Signature’s collapses are the second- and third-largest bank failures in US history behind the demise of Washington Mutual during the global financial crisis in 2008.

Banking stocks globally have been battered since SVB collapsed, with the S&P Banks index falling 22 per cent, its largest two weeks of losses since the pandemic shook markets in March 2020.

Big US banks threw a $US30 billion lifeline to smaller lender First Republic, and US banks altogether have sought a record $US153 billion in emergency liquidity from the Federal Reserve in recent days.

A coalition of midsize US banks, Mid-Size Bank Coalition of America (MBCA), asked regulators to extend FDIC insurance to all deposits for the next two years, Bloomberg News reported on Saturday, citing an MBCA letter to regulators.

In Washington, focus has turned to greater oversight to ensure that banks and their executives are held accountable.

Biden called on Congress to give regulators greater power over the sector, including imposing higher fines, clawing back funds and barring officials from failed banks.

Reuters

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.