In the midst of the ongoing banking crisis, Credit Suisse has been handed over to its main rival, UBS, for just over $3bn. This marks the first major victim of the stock market storm that banks have been experiencing for the past week. The Swiss government has practically given away one of the country’s financial flagships. The deal involves paying a price far short of the 1.86 Swiss francs for its shares as of Friday. The agreement also includes a guarantee equivalent to more than €9bn to reduce the risks incurred by UBS in the takeover.
However, the acquiring bank wanted to secure a legal shield to protect it against future claims. UBS chairman Colm Kellenher said that the new period ahead will be difficult for the staff of Credit Suisse. None of the speakers gave an estimate of the number of workers who will lose their jobs as a result of this measure. Kellenher assured that after this transaction his bank will remain “rock solid” and that his strategy in this new phase will be to “grow our capital”. Credit Suisse’s investment banking unit, which has been the one that has given him the most problems in recent years and which was involved in several scandals that tarnished its reputation, will be reduced.
Among the details he offered, Kellenher said that the size of Credit Suisse’s investment banking unit, which has been the one that has given him the most problems in recent years and which was involved in several scandals that tarnished its reputation, will be reduced. That investment banking “will not represent more than 25% of the bank’s assets”, said the president of UBS in words picked up by Efe. He has also indicated that Credit Suisse First Boston, the absorbed bank’s investment banking arm in the U.S., will continue to operate. “We are committed to making this operation a great success,” the executive assured.
The entity has just experienced a black week in the stock market after the loss of confidence on the part of investors and clients. Its shares have plummeted 26% and the fear of regulators and supervisors was that the punishment would continue in the absence of a reliable viability plan. This is the best way to “restore confidence. This solution is not only decisive for Switzerland, but for the stability of the entire global financial system,” said Berset during the press conference, in the presence of the chairmen of the two banking giants, Colm Kelleher for UBS and Axel Lehmann for Credit Suisse. For her part, Finance Minister Karin Keller-Sutter declared that Credit Suisse’s bankruptcy could have caused “irreparable economic damage”. “For this reason, Switzerland must assume its responsibilities beyond its borders,” she added.