Home » Is the UBS Deal of $3.3b the Starting of the Banking Crisis 2023?
UBS has agreed to purchase Credit Suisse for $3.3 billion in a deal brokered by the Swiss government to help contain a crisis of confidence in the banking system. The acquisition will involve UBS taking on up to $5.4 billion in losses and providing Credit Suisse with liquidity assistance of 100 billion Swiss francs ($108 billion). The deal has been deemed necessary by Swiss regulators to prevent any negative impact on the wider financial system. The Swiss central bank will supply significant liquidity to the merged bank, and the deal is expected to close by the end of 2023. While the acquisition may help restore trust in Swiss lenders, it remains to be seen how it will impact financial markets globally. 
UBS Chairman Colm Kelleher has announced plans to shrink Credit Suisse’s investment bank unit, which has been a source of losses for the bank in recent years. This move is expected to end the prospect of a spinoff of CS First Boston, a dream that many had held for years. The decision to shrink the investment bank is part of a broader plan to improve Credit Suisse’s profitability and streamline its operations.
The move is aimed at reducing the bank’s exposure to riskier trading activities and focusing on more stable revenue streams. While this decision may be disappointing for some at Credit Suisse, it is seen as a necessary step to ensure the bank’s long-term sustainability and profitability.
Following the announcement of the acquisition of Credit Suisse by UBS, major central banks including the U.S. Federal Reserve and the European Central Bank issued statements to reassure markets that have been impacted by the ongoing banking crisis. The crisis began with the collapse of two regional U.S. banks earlier this month, which sent shockwaves through financial markets. The central banks’ statements were aimed at restoring confidence and stability in the global financial system. It remains to be seen how effective these efforts will be in the face of ongoing uncertainty and volatility in the markets. However, the central banks’ actions are seen as a positive development in the ongoing efforts to address the challenges facing the banking sector.
The response of major central banks to the ongoing banking crisis has been described as a global effort not seen since the height of the pandemic. In a coordinated action, the U.S. Federal Reserve, along with central banks in Canada, England, Japan, the EU, and Switzerland, announced measures to enhance market liquidity and support the banking sector. The European Central Bank has also pledged to provide loans to euro zone banks if needed, and has praised the Swiss rescue of Credit Suisse as “instrumental” in restoring calm to the markets. These actions are seen as critical in addressing the challenges facing the banking sector and restoring confidence in the global financial system. However, it remains to be seen how effective these measures will be in the face of ongoing uncertainty and volatility.