London (CNN) Switzerland’s biggest bank, UBS, has agreed to buy struggling rival Credit Suisse in an emergency bailout deal aimed at stemming a financial market panic that saw the collapse of two American banks earlier this month.
“UBS today announced the takeover of Credit Suisse,” the Swiss National Bank said in a statement. “This takeover was made possible with the support of the Swiss Federal Government, the Swiss Financial Market Supervisory Authority and the Swiss National Bank,” the central bank added.
It said the bailout would “ensure financial stability and protect the Swiss economy.”
Swiss credit (CS) had lost the trust of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But the trust slumped last week after it admitted a “material weakness” in its books and the liquidation of Silicon Valley Bank and Signature Bank stoked fears of weaker institutions at a time when rising interest rates have eroded the value of some financial assets.
The 167-year-old bank’s shares fell 25% during the week, money was flowing out of the mutual funds it manages, and at one point account holders were withdrawing more than $10 billion in deposits a day, the Financial Times reported. An emergency loan from the Swiss National Bank did not stop the bleeding.
Desperate to prevent the collapse from spreading to the global financial system on Monday, Swiss authorities had pushed hard to bail out the private sector, while reportedly considering Plan B – full or partial nationalization.
The emergency coup was agreed after days of heated negotiations involving financial regulators from Switzerland, the United States and the United Kingdom. UBS (UBS) and Credit Suisse are among the top 30 banks in the global financial system, with combined assets of nearly $1.7 trillion.
The global headquarters of UBS and Credit Suisse are only 300 meters from each other in Zurich, but the fortunes of the banks have recently been very different. Shares in UBS have risen 15% over the past two years, and it posted a $7.6 billion profit in 2022. Its stock market capitalization was about $65 billion on Friday, according to Refinitiv.
Shares in Credit Suisse have lost 84 percent of their value over the same period, and last year posted a $7.9 billion loss. It was worth just $8 billion at the end of last week.
Dating back to 1856, Credit Suisse has its roots in the Schweizerische Kreditanstalt (SKA), which was founded to finance the expansion of the railway network and the industrialization of Switzerland.
In addition to being Switzerland’s second largest bank, it looks after the assets of many of the world’s richest people and offers global investment banking services. It employed more than 50,000 employees at the end of 2022.
This is a developing story and will be updated.