Over the weekend, several major central banks united to prevent a banking crisis from spreading, while Swiss authorities convinced UBS Group AG to purchase Credit Suisse Group AG in a significant acquisition. UBS will pay 3 billion Swiss francs for Credit Suisse and could assume losses of up to $5.4 billion.
The acquisition is expected to be completed by the end of 2023 and has received substantial Swiss backing. Following the announcement, the US Federal Reserve, European Central Bank, and other major central banks issued statements to reassure markets, which have been negatively impacted by the collapse of two US regional banks earlier this month.
The S&P 500 and Nasdaq futures increased by 0.4%, but New Zealand and Australian shares opened with losses. The deal was influenced by pressure on UBS.
On Sunday, some of the largest central banks in the world collaborated to prevent a banking crisis from spreading. The Swiss authorities convinced UBS Group AG to purchase Credit Suisse Group AG in a historic deal worth 3 billion Swiss francs ($3.23 billion).
The deal, which is backed by a large Swiss guarantee, will see UBS assume up to $5.4 billion in losses and is expected to close by the end of 2023. Following the announcement of the deal, major central banks, such as the U.S. Federal Reserve and the European Central Bank, issued statements to reassure the markets that have been affected by the recent banking crisis.
UBS to acquire Credit Suisse bank
The S&P 500 and Nasdaq futures rose by 0.4%, while New Zealand experienced a dip at the open and Australian shares opened with a 0.5% loss. The safe-haven dollar decreased against Sterling and the euro but increased against the yen. Pressure on UBS was a crucial factor in the finalization of the deal.
Despite several large banks depositing $30 billion into First Republic Bank, the U.S. banking sector still faces issues as bank stocks remain under pressure. S&P Global downgraded First Republic’s credit ratings into junk status despite the deposit infusion, stating that it may not solve the bank’s liquidity problems.
The problems faced by Credit Suisse are not related to the recent deposit runs on U.S. banks, and U.S. banks have limited exposure to Credit Suisse. The FDIC plans to relaunch the sale process for Silicon Valley Bank and potentially break up the lender. In Europe, major banks sought stronger signals of support from the Fed and ECB to stem contagion.
The Swiss central bank announced that it will provide 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse, and Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held.
The deal includes winding down Credit Suisse’s investment bank, which has thousands of employees worldwide. Some Credit Suisse bondholders may face losses, as Swiss regulators decided to value $17 billion worth of Credit Suisse bonds at zero.