FINMA has officially given their support to the acquisition of Credit Suisse by UBS. They are pleased with the decision of the Swiss Confederation and the Swiss National Bank SNB to go ahead with the takeover. This will ensure the security of the bank’s customers, as well as the stability of the financial centre. The SNB has further provided liquidity assistance, which is supported by a default guarantee from the Swiss Confederation. With this assurance, all business activities of both banks will continue with no setbacks or disruptions.
Confidence in the Credit Suisse Group has been shaken, leading to substantial withdrawals from customers. This was further exacerbated by the turbulence in the US banking sector in March 2023. The possibility of the bank becoming non-liquid, even while still financially sound, necessitated the need for the relevant parties to take steps to avert any severe harm to both the Swiss and global economic systems.
UBS to assume control of Credit Suisse
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For a number of months, FINMA had been closely monitoring Credit Suisse. The bank had undertaken various measures in order to stabilise their situation, yet these did not prove sufficient to restore trust. Consequently, more extensive options were considered. As a way to safeguard depositors and the financial markets, FINMA accepted the proposal from UBS to take over Credit Suisse, which was the most efficient solution.
UBS Shares Live Price
Backed by official recognition, the transaction is endorsed
UBS is set to acquire Credit Suisse in its entirety with the support of the Swiss Confederation, the FINMA, and the SNB. In consequence of this governmental aid, all AT1 shares of Credit Suisse will experience a write-down of the nominal value to the tune of CHF 16 billion, thus resulting in an increase of core capital.
By virtue of the acquisition, the banking institution will be much bigger, which necessitates greater capital reserves as per the existing regulations. In this regard, FINMA will provide a suitable period for the institution to accumulate the buffers.
FINMA will be vigilantly observing the transaction and ensuring that all supervisory law requirements are met. As usual, it will be in ongoing communication with applicable bodies, including the United States Federal Reserve and the British Prudential Regulatory Authority, like it has been doing in the months prior.
The Swiss Confederation and the Swiss National Bank have agreed to offer extra liquidity to the market.
To ensure that all commitments can still be upheld throughout the deal, further liquidity support will be offered. This means that the banks involved in the transaction will have substantial extra liquidity to execute the takeover. The SNB will grant a loan that is backed by a government assurance. Additionally, the Swiss Confederation shall also offer guarantees for possible losses on certain assets that UBS is going to gather as part of the transaction, if those losses exceed a predetermined limit (media release by the Federal Council and media release by the SNB).
Banking facilities will remain available without any disruption
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In order to carry on with their operations, banks will be able to keep on providing their services without limitation or disruption. This is a safeguard for depositors as their accounts, security accounts, and other features (such as counters, ATMs, e-banking, debit and credit cards) will remain accessible in the same manner.
Is the UBS Deal of $3.3b the Starting of the Banking Crisis 2023?
No, the UBS deal of $3.3 billion to acquire Credit Suisse is not the starting point of the banking crisis in 2023 [1]. The acquisition is seen as necessary by Swiss regulators to prevent any negative impact on the wider financial system. The Swiss central bank will provide significant liquidity to the merged bank. Major central banks, including the U.S. Federal Reserve and the European Central Bank, have issued statements to reassure markets after the ongoing banking crisis, aiming to restore confidence and stability in the global financial system.
References: [1] Is the UBS Deal of $3.3b the Starting of the Banking Crisis …
