iifl-logo-icon 1

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

UBS acquires Credit Suisse for $3.5 billion

20 Mar 2023 , 04:05 PM

In an effort to prevent future market-shaking turbulence in the global banking system, banking behemoth UBS is purchasing ailing rival Credit Suisse for about $3.25 billion.

After a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to satisfy investors and the bank’s clients, Swiss authorities pushed for UBS to acquire its smaller rival. Shares of Credit Suisse and other banks fell this week as a result of worries about more potentially unstable institutions in the global financial system raised by the bankruptcy of two U.S. banks.

One of the 30 financial organizations considered to be globally systemically significant banks is Credit Suisse, and regulators are concerned about the repercussions if it were to fail.

For the stability of global finance, the transaction was ‘one of immense width, ‘Alain Berset, the president of Switzerland, made the announcement on Sunday night. ‘Unimaginable repercussions for the nation and the global financial system would result from an unchecked collapse of Credit Suisse.

Switzerland’s executive branch, a seven-member governing body that includes Berset, enacted an emergency ordinance allowing the merger to go through without shareholder approval.

Axel Lehmann, chairman of Credit Suisse, described the sale as ‘a decisive turning point.’

The world’s central banks planned coordinated financial actions to stabilize banks in the upcoming week in response to news of the Swiss agreement. For banks wishing to borrow dollars on a daily basis, a facility that was heavily used during the 2008 financial crisis, is also included. Such swap lines have been used to borrow $580 billion three months after Lehman Brothers failed in September 2008. Moreover, additional swap lines were launched amid market turbulence at the start of the COVID-19 pandemic in March 2020.

The chairman of UBS, Colm Kelleher, praised the ‘enormous prospects’ that result from the acquisition and emphasized his bank’s ‘conservative risk culture’ in a subtly critical reference to Credit Suisse’s reputation for taking more daring, risky bets in an effort to increase profits. He claimed that the combined organization would produce a wealth manager with invested assets totaling more than $5 trillion.

The council ‘regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this condition at all,’ according to Swiss Finance Minister Karin Keller-Sutter.

The merger of the two largest and most well-known Swiss banks, each with illustrious histories going back to the middle of the 19th century, amounts to a thunderclap for Switzerland’s status as a major international financial hub, putting the country on the verge of having a single national banking champion.

Although the parent bank of Credit Suisse is not subject to European Union oversight, certain of its subsidiaries in various European nations are. Lagarde reaffirmed what she said the week before after the central bank increased interest rates, stating that the European banking industry is resilient and has a lot of available cash as well as significant financial reserves.

The vulnerabilities that led to the loss of Silicon Valley Bank and Signature Bank, whose failures necessitated a large rescue effort by the Federal Deposit Insurance Corp. and the Federal Reserve, are not shared by many of Credit Suisse’s issues. Hence, their failure does not inevitably portend the beginning of a financial crisis like the one that occurred in 2008.

With $1.4 trillion in assets under management, Credit Suisse still has significant influence despite being smaller than its Swiss rival UBS. The company serves the rich and famous through its wealth management division, has big trading desks around the world, and is a key advisor for multinational corporations in mergers and acquisitions. It is noteworthy that whereas UBS required government help in 2008 during the financial crisis, Credit Suisse did not.

The Swiss bank has been attempting to acquire money from investors and implement a new strategy to get out from under a number of difficulties, including failed hedge fund bets, recurrent management changes, and a UBS spying scandal.

For feedback and suggestions, write to us at editorial@iifl.com

explored-media

Related Tags

  • Banking
  • International
  • UBS
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.