Swiss banking powerhouse UBS agreed to purchase its longtime rival Credit Suisse for around $3 billion on Sunday in an emergency deal that prevented one of the world’s biggest banks from failing.
The two Swiss banks were roughly equal as recently as 2010, but a series of bad decisions and investor fears had Credit Suisse on the brink of collapse. Even a $54 million loan from the Swiss National Bank last week couldn’t save the lender.
“Let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue,” UBS Chairman Colm Kelleher said in a press release. “We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.”
Swiss authorities engineered the deal and forced it through without UBS shareholder approval.
Financial institutions worldwide are struggling to restore investor confidence following the collapses of Silicon Valley Bank and Signature Bank in the U.S. Those failures, which came within a week of each other, were the second- and third-largest bank failures in American history.
The chaotic climate made Credit Suisse “an important bellwether of fragilities in the global banking system,” according to Cornell University economist Eswar Prasad.
Following the 2008 financial crisis, 30 banks worldwide were labeled globally systemically important, and 166-year-old Credit Suisse was one of them. But that didn’t stop bank leaders from making questionable investments and a series of disastrous decisions — including spying on UBS at one point.
Experts were quick to point out that Credit Suisse had been in trouble for years, and its would-be collapse was not directly related to the U.S. banking failures.
The bank was “in trouble because it’s been in trouble for a really long time,” said economist Megan Greene of the Kroll Institute. “It has a whole host of other challenges that everyone’s focusing on now because of bank wobbles in the U.S.”
With News Wire Services