On Sunday, UBS and competitor Credit Suisse reached a purchase agreement. This was verified by the Swiss bank. UBS will make a payment of $3.23 billion in Swiss francs.
UBS will make a payment of CHF 3 billion and take on losses up to $5.4 billion.
By the end of 2023, the agreement is anticipated to be finalised.
On Sunday, UBS and competitor Credit Suisse reached an agreement to merge. In an agreement that is anticipated to be completed by the end of 2023, UBS will pay 3 billion Swiss francs ($3.23 billion) and cover up to $5.4 billion in damages.
UBS will acquire Credit Suisse.
The sale negotiations were started by the Swiss Federal Department of Finance, FINMA, and the Swiss National Bank in response to the continuing Credit Suisse problem. The buyout agreement already has the permission of the Swiss financial market authority; no shareholder approval was required.
But let’s be clear: As far as Credit Suisse is concerned, this is an emergency rescue, according to UBS Chairman Colm Kelleher. “This transaction is favourable for UBS shareholders,” he said. “We have designed a deal to minimise our downside risk while preserving the value that is still in the company.”
UBS benefited from the merger since it agreed to pay the competing bank around CHF 0.76 per share of its own shares. The approved price is still much less than Friday’s closing share price of CHF 1.86 for Credit Suisse.
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“The skills of Credit Suisse in asset management, Swiss universal banking, and wealth management will be added to UBS’s plan for expanding its capital-light operations. Clients will gain from the deal, and our investors will see long-term, sustainable value created “And Kelleher.
The Agreement Will Improve UBS’ Worldwide Position
The combined UBS and Credit Suisse company will have more than $5 trillion in total invested assets after the acquisition is finalised. With the merged investment banking operation absorbing around 25% of its risk-weighted assets, it will also make UBS the biggest wealth manager.
Ralph Hamers, the current CEO of UBS, would serve as Group CEO of the merged company, with Kelleher as Chairman.
Together, UBS and Credit Suisse will strengthen UBS’s advantages, expand our capacity to service clients internationally, and deepen our best-in-class capabilities, according to Hamers. “The alliance complements our aspirations for expansion in the Americas and Asia while expanding our company’s footprint in Europe.”
A Swiss Financial Catastrophe Can Be Avoided
The U.S. Federal Reserve said it has partnered with central banks in Canada, England, Japan, the EU, and Switzerland in a concerted operation to increase market liquidity, according to the Reuters story, as an indication of a coordinated global reaction. The Swiss bailout of Credit Suisse was “important” in bringing about calm, the European Central Bank said in a statement, adding that it will provide loans to eurozone banks if necessary..
After the bank’s stock prices continuing their sharp decline, Credit Suisse said on Thursday that it will borrow up to CHF 50 billion (about $54 billion) from the Swiss National Bank to boost liquidity and market confidence. The move by Credit Suisse came after the bank’s share price plunged by around 30% on Wednesday, and the Swiss authorities offered an emergency financial lifeline to save the company from any possible disaster.
Karin Keller-Sutter, the Swiss Finance Minister, emphasised that the UBS-Credit Suisse transaction is “”The bankruptcy would have had enormous collateral damage on the Swiss financial sector and with a danger of contagion worldwide, not a rescue,” it said. They truly thought that Credit Suisse would go bankrupt, thus the US and UK were really appreciative of this arrangement.”
Several business experts, however, disagree and think the acquisition was a Credit Suisse rescue.
With assets of around CHF 530 billion ($573 billion), Credit Suisse is the first major international bank to obtain an emergency lifeline since the 2008 financial crisis. After reporting an annual loss of CHF 7.3 billion, the lender was already in difficulty. This loss was the largest since the 2008 financial crisis. In a postponed report filed in the United States, it also emphasised “serious flaws” in its control and reporting procedures during the previous two years. UBS, however, generated a $7.6 billion profit within the same time period.