Dhe crisis-ridden Credit Suisse (CS) could end up in the arms of its Zurich local rival UBS and lose its independence after 167 years. As has been confirmed in well-informed circles, negotiations are under way for UBS to take over CS. If possible, they should be completed by Sunday evening, but they could also fail.
The Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (Finma) are involved in the negotiations, as is the Swiss government, which met for crisis meetings on Saturday evening and Sunday morning. After that there was no comment from the government; all the other participants also remained silent at the weekend.
Customers probably withdrew a lot of money
On Thursday it still looked as if the SNB would bring some calm to the heated mood around the scandal- and loss-plagued major bank with its liquidity injection of CHF 50 billion. But on Friday, the badly battered CS share price on the stock exchange collapsed again. And the risk premiums for CS bonds also remained at a record high, which shows that the market continues to have doubts about the bank’s future viability.
Apparently, unsettled customers continued to withdraw funds on a large scale. Regulators are the driving force behind the takeover. They fear that a “bank run” and the subsequent collapse of Credit Suisse could not only severely damage the Swiss financial center, but also fuel the already tense situation in the banking industry due to the collapse of Silicon Valley Bank could shake the international financial system.
As a systemically important bank with total assets of CHF 531 billion and a strong presence in investment banking, CS has business ties with financial institutions around the world. At the end of the past week, some of them apparently already issued the slogan internally to shut down business with the Swiss.
Lots of work for UBS
UBS had maintained until the very end that it had no interest in taking over its fallen rival. And with good reason: UBS’s business is doing well; she is solid. If Credit Suisse were to be integrated, it would take on immense work for years to come. Harmonizing the IT systems alone is a Herculean task, not to mention the different cultures of the companies that have always been very competitive.
A takeover also entails enormous financial risks. After all, after a number of homemade scandals that can be traced back to inadequate risk management, CS is involved in numerous legal disputes that are likely to entail costs in the billions.
Billions in aid from the state?
Against this background, the negotiations are not just about the price at which a takeover bid could be made to Credit Suisse shareholders. CS was worth CHF 7.4 billion on the stock exchange on Friday. Usually, however, shareholders are offered a surcharge in the case of takeovers so that they can also tender their share certificates.