Amid the Swiss banking crisis, emergency measures will be taken to facilitate UBS’ takeover of Credit Suisse without the usual “six-week consultation period” with the shareholders, as per the people close to the matter.
UBS’ Takeover of Credit Suisse
Three people associated with the matter said that the Swiss National Bank (SNB) and the country’s financial regulators think that the acquisition of Credit Suisse, an investment bank, by Switzerland’s largest bank, UBS, is supposedly the only option to preventing a “collapse in confidence.”
A March 18, 2023, media report highlights that Switzerland is actively preparing for the use of some “emergency measure” to expedite the takeover process. All is done to finalize the process before markets open on Monday, March 20, 2023.
What is Wrong With Credit Suisse?
The US banking crisis contagion seemingly crossed the Atlantic, affecting Swiss bank Credit Suisse. The bank said it would borrow cash from the Swiss central bank to refill its liquidity. Taking advantage of the situation, arch-rival UBS Group came with an offer for acquisition.
Credit Suisse was battling the global banking crisis for quite a while, but when their largest shareholder, Saudi National Bank, told Bloomberg TV that they would not be adding to their investments in the bank due to regulatory issues. They already own 9.9% of the European lender, while the capital requirements prevent banks from holding more than 10% of other banks.
The Fast Track Process
Reportedly, the emergency measure eliminates the shareholder’s voting procedure, bypassing the customary Swiss regulations that compensate for a six-week consultation period in which the shareholders consult on the possibilities of the acquisition.
The SNB and the Swiss Financial Market Supervisory Authority (FINMA) were reportedly working together to “reach regulatory agreement” by the evening of March 18, 2023. They have already told their international counterparts regarding the deal, saying that this quick method is the only way to avoid a collapse.
UBS Comes to the Rescue
UBS has about $1.1 trillion of total assets on its balance sheet, and Credit Suisse has about $575 billion. The merger of these two entities could, in theory, create one of “the biggest global systemically important financial institutions in Europe.” However, those familiar with the matter clarified that the combined entity formed after the merger will not be more than one-third of the merged groups.
Previously, BlackRock, an American investment company, denied any interest in acquiring Credit Suisse.
On March 15, 2023, SNB and FINMA released a statement that Credit Suisse meets the requirements of capital and liquidity imposed over systemically important banks. Also, if required, SNB would provide the lender with liquidity and has noted that Credit Suisse has been affected badly by the recent market incidents.
Recent incidents in the banking industry have rocked the world. Some believe this is the beginning of the end, while some think these are the signs of an impending global economic crisis. It is also said that the current situation is worse than 2008. Hence many leaders have already advised people to save their assets and be prepared for worse.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/03/19/ubs-to-acquire-credit-suisse-switzerland-expedites-procedure/