UBS and Credit Suisse Discuss Potential Merger Amid Banking Crisis
UBS Group (NYSE:UBS) is in talks to acquire all or part of Credit Suisse (NYSE:CS) in what would be the most significant banking merger in Europe since the 2008 Great Recession. The potential deal, which could be finalized as soon as Sunday, could involve UBS acquiring Credit Suisse to obtain its wealth and asset management units while possibly divesting the investment banking division. This potential merger comes as Swiss and global authorities work to mitigate banking sector contagion and restore confidence in the financial system.[0]
The two Swiss banks are talking about an array of solutions, according to a person briefed on the discussions.[1] UBS has set a number of conditions related to the deal, including requesting indemnities or agreements from the Swiss government related to potential legal costs. UBS is also asking the Swiss government to take on certain legal costs and potential future losses in any deal.
American investment company BlackRock has since stated that it “has no interest” in acquiring Credit Suisse.[2] This comes as the future of Credit Suisse hangs in the balance as efforts intensify to rescue the stricken bank amid the growing global banking crisis. Credit Suisse took a US$54 billion lifeline thrown by the Swiss central bank, however, investors remain nervous about its future.
The potential merger between UBS and Credit Suisse would create one of the biggest global systemically important financial institutions in Europe. UBS's balance sheet holds a total of $1.1tn in assets, while Credit Suisse's holds $575bn.[3] 30 banks around the globe have been identified as being too big to fail owing to their critical role in the global banking system.[4]
At the prodding of regulators, UBS has put aside its initial opposition to a deal and is exploring possible structures that could be executed quickly to halt a deep crisis of confidence.[5] UBS is assessing the potential risks a deal could have for itself and is in favour of phasing in any further demands on global capital rules for systemically relevant institutions.[1]
The problems have coincided with the failure of two lenders in the US – Silicon Valley Bank and Signature Bank – raising fears over the health of the banking system.[4] Credit Suisse had already embarked upon a huge restructuring plan with the intention of bringing back stability and profitability.[6] It has faced various scandals and controversies over recent years, including the fallout from its involvement with the collapsed supply chain finance firm, Greensill Capital, which led to $1.7 billion in losses.[6]
0. “UBS Nears Acquisition of Credit Suisse Amid Efforts to Stabilize Banking Sector” ForexLive, 18 Mar. 2023, https://www.forexlive.com/news/ubs-nears-acquisition-of-credit-suisse-amid-efforts-to-stabilize-banking-sector-20230318/
1. “UBS said to be in talks to take over embattled lender Credit Suisse (NYSE:CS)” Seeking Alpha, 17 Mar. 2023, https://seekingalpha.com/news/3948655-ubs-said-to-be-in-talks-to-take-over-embattled-lender-credit-suisse
2. “Switzerland preparing emergency measures for UBS' takeover of Credit Suisse: Report” Cointelegraph, 19 Mar. 2023, https://cointelegraph.com/news/switzerland-preparing-emergency-measures-for-ubs-takeover-of-credit-suisse-report
3. “UBS and regulators rush to seal Credit Suisse takeover deal possibly by Sunday: reports” MarketWatch, 18 Mar. 2023, https://www.marketwatch.com/story/ubs-and-regulators-rush-to-seal-credit-suisse-takeover-deal-reports-2f4ccfbc
4. “Credit Suisse bank: UBS said to be in takeover talks with troubled rival” BBC, 19 Mar. 2023, https://www.bbc.com/news/business-65004605
5. “Credit Suisse Crisis Nears Finale as UBS Discussions Heat Up” Yahoo News, 18 Mar. 2023, https://news.yahoo.com/ubs-seeks-swiss-backstop-credit-115808443.html
6. “BlackRock denies report that it's preparing a takeover bid for Credit Suisse” CNBC, 18 Mar. 2023, https://www.cnbc.com/2023/03/18/blackrock-is-working-on-a-rival-takeover-bid-for-credit-suisse-financial-times-reports.html
