Swiss Government Mediates Acquisition of Troubled Credit Suisse by UBS
On Sunday, Swiss officials orchestrated a timely emergency takeover of troubled Credit Suisse by UBS, another major banking firm.
At a press conference, President Alain Berset expressed his concerns about the disruption in the banking industry which had left Credit Suisse vulnerable and announced that the new agreement was essential for the preservation of the bank and the global financial system.
As per the agreement, UBS Group AG will purchase Credit Suisse for over $3 billion in an all stock transaction, with an added $100 billion from the Swiss Central Bank.
UBS and troubled Credit Suisse have announced a marriage, the latest development in an ongoing string of banking challenges that began when Silicon Valley Bank failed.
Recent days have seen billions of dollars withdrawn from Credit Suisse due to investors' and depositors' fear of insolvency, leaving the Swiss central bank to step in with a $54 billion lifeline. This still wasn't enough to steady the institution, and the situation is particularly precarious considering Credit Suisse is a so-called global systemically important bank - meaning many other parts of the world economy could be impacted if it fails.
Last week marked the climax of the Credit Suisse crisis, as the bank revealed "material weaknesses" in its financial reporting. The decline of the bank, however, had been very prominent for some time prior to this, with a succession of financial and political scandals severely impacting the bank's reputation and earnings. Its stock has seen plummeting by over 80% in the past two years.
Credit Suisse was established 166 years back to assist with the financing of Switzerland's railway system. Over the years, it has become a renowned name in the banking world, becoming one of the most prominent banks on a global scale. Sadly, its reputation has taken some serious blows over the recent years, having been connected with a money laundering situation that involved a cocaine trafficking ring in Bulgaria and hiring private investigators to monitor an employee who switched to a rival company.