On Friday, Credit Suisse, the Swiss banking giant, agreed to a $3 billion acquisition by its rival UBS. There have been significant concerns about the global banking situation. Critics say it’s a quick fire sale. Swiss Finance Minister, Karin Keller-Sutter said,’’ this is a commercial solution. This is no bailout. We really wanted to avoid a bailout for different reasons”.
Alain Berset, Switzerland’s president with two executives from both banks and the chairman of the Swiss National Bank announced the takeover. SNB said in a statement, ‘’ with the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation”.
UBS predicted that combining the two businesses would generate annual cost reductions of over $8 billion by 2027. UBS Chairman, Colm Kelleher, stated that the investment bank will account for a maximum of 25% of risk-weighted assets.
Credit Suisse experienced a downfall shortly after U.S. banks SVB Financial and Signature Bank collapsed. Although Credit Suisse and Swiss authorities claimed to have different issues, customers still left. According to the FT, wealthy clients withdrew approximately $100 billion from Credit Suisse in Q4, resulting in significant outflows.
Due to its links with family office Archegos and the freeze of $10 billion in supply chain funds sold through the bank. Also, managed by Greensill Capital, Credit Suisse has reported losses for five consecutive quarters.
To overcome several issues, including losses from hedge funds, a revolving door of top management, and a spying scandal involving UBS, Credit Suisse has been striving to raise funds from investors and implement a new strategy.
