Credit Suisse to meet to weigh options with UBS under merger pressure

March 18 (Reuters) – Credit Suisse Group AG ( CSGN.S ) kicked off the weekend with a bang after some rivals were wary of dealing with the bank after regulators urged it to pursue a deal with Swiss rival UBS AG ( UBSG ). S).

Credit Suisse CFO Dixit Joshi and his team will hold meetings over the weekend to assess the bank’s strategic scenarios, people with knowledge of the matter said on Friday.

The 167-year-old bank is the biggest name caught in the market turmoil that saw US lenders Silicon Valley Bank and Signature Bank collapse last week, forcing the Swiss bank to use $54 billion in central bank funding.

Swiss regulators are encouraging UBS and Credit Suisse to merge, but neither bank wanted to do so, one of the sources said. Regulators don’t have the power to force a merger, the person said.

The boards of UBS and Credit Suisse were expected to meet separately at the weekend, the Financial Times said.

Credit Suisse shares jumped 9% in aftermarket trading after the FT report. Credit Suisse and UBS declined to comment.

In the latest sign of its mounting problems, at least four major banks, including Societe Generale SA ( SOGN.PA ) and Deutsche Bank AG ( DBKGn.DE ), have imposed restrictions on trading in Credit Suisse or its securities, five people with direct knowledge of the matter told Reuters.

“Swiss central bank intervention was a necessary step to calm the flames, but it may not be enough to restore confidence in Credit Suisse, so there is talk of further action,” said Frederique Carrier, head of investment strategy at RBC Wealth Management.

The effort to prop up Credit Suisse comes as policymakers such as the European Central Bank and US President Joe Biden sought to reassure investors and depositors that the global banking system is safe. But fears of wider problems in the industry persist.

Already this week, major U.S. banks offered a $30 billion lifeline to smaller lender First Republic ( FRC.N ), while U.S. banks have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

This reflected “strains on bank funding and liquidity due to weakening depositor confidence,” said credit rating agency Moody’s, which this week downgraded the outlook for the US banking system to negative.

In Washington, the focus turned to better oversight to ensure that banks – and their managers – are held accountable.

Biden called on Congress to give regulators more power in the banking sector, including imposing higher fines, recovering assets and barring officials from failing banks.

Some Democratic lawmakers asked regulators and the Justice Department to investigate Goldman Sachs’ ( GS.N ) role in SVB’s collapse, Representative Adam Schiff’s office said.

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Bank stocks have been battered globally since the collapse of Silicon Valley Bank, raising questions about other weaknesses in the financial system.

Shares of U.S. regional banks fell sharply on Friday, with the S&P Banks Index (.SPXBK) down 4.6%, extending its loss over the past two weeks to 21.5%, its worst two-week calendar loss since the COVID-19 pandemic rocked markets in March . 2020.

First Republic Bank closed down 32.8 percent on Friday, bringing its losses over the past 10 sessions to more than 80 percent. Moody’s lowered the bank’s debt rating after the stock market closed.

While support from some of the biggest names in US banking prevented First Republic from collapsing this week, investors were stunned by its cash position and how much emergency liquidity it needed.

SVB Financial Group filed for bankruptcy under a court-supervised reorganization just days after regulators took over its Silicon Valley Bank unit.

Regulatory authorities had asked banks interested in buying SVB and Signature Bank to submit offers by Friday, people familiar with the matter said.

Regulators are considering retaining ownership of securities held by Signature and SVB to allow smaller banks to participate in auctions of the failed lenders, a source familiar with the matter said.

Reuters bureau reports; Written by Lincoln Feast; Surgery William Mallard

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