The UBS Group AG made an official announcement that stated that the bank will be taking over their long-time rival Credit Suisse for $3.25 billion, following the financial crisis at the bank.
The decision by the UBS Group was taken on Sunday and the move was mediated by the Swiss authorities who wanted to stop the bank from triggering an international banking crisis following the events that took place in the United States recently.
The UBS Group is the largest bank network in Switzerland and Credit Suisse was regarded as the second-largest banking firm in the country.
According to the statement by the Swiss government, the largest banking firm in the country has decided to take over the troubled Credit Suisse, which was the second largest banking firm in the country as a means to put a stoppage to the crisis in the banking sector that can have both national and international effect.
The news about the acquisition was welcomed by different centers like Frankfurt, London, and Washington as the firms decided to help each other and save the banking detector from a probable disaster.
The international banking sector had been facing quite some problems, including the collapse of two major banking firms in the United States – The Silicon Valley Bank and the Signature Bank.
The decision about taking over the firm was very crucial and a strong decision on the part of UBS Group was needed before the reopening of the market on Monday. The decision to take over the troubled firm Credit Suisse by UBS Group was announced in a press conference.
Different notable personalities of both the banks and also from the part of the Swiss government were present during the conference. Along with the Swiss president Alain Berset, the chairman of UBS Group Colm Kelleher, and the chairman of Credit Suisse Axel Lehmann were present at the event.
Other officials like the Swiss finance minister, top officials from the Swiss National Bank, and also the financial regulator FINMA were present too.
The UBS Group has agreed to take over Credit Suisse for around $3 billion. The move to save the second-largest banking firm in Switzerland is also a gesture to maintain the trust that people have in the banking sector owing to the different events that took place, regarding banking firms in the recent past.
The government of Switzerland has also offered around $9 billion to UBS if the firm incurs any loss in their process of acquiring Credit Suisse. Along with the Swiss government, the Swiss National Bank has also offered UBS Group a $100 billion liquidity as a means to facilitate the process.
The nation of Switzerland is known for its wealthy banking sector. According to the statement of Swiss President Berset, the acquisition of Credit Suisse was the best and most suitable method to restore the trust and confidence that people had been lacking in the banking sector and other financial institutions recently.
Berset also expressed his concern about the consequences that the country would have to face if Credit Suisse collapsed like other large firms in the United States. He seriously doubted that if the bank collapsed, it would have pushed the country into financial instability that could be effective on an international level.
Credit Suisse faced a huge loss on the stock market in recent weeks, the value of their shares fell drastically and the share price of the bank when the market closed on Friday was 1.86 francs. This brought the overall worth of the bank to just $8.7 billion.
According to the chairman of Credit Suisse, the announced merger with UBS Group is the best possible outcome that the firm can have from the recent unpredicted circumstances. After the acquisition, UBS Group said in a statement that the shareholders of Credit Suisse will receive around 0.76 Swiss francs per share.
The merger of the two largest banking firms in the country is supported by experts and is seen as an initiative that can save the country and also other banks in other countries from an economic crisis.
The finance minister of Switzerland Karin Keller-Sutter stated that the collapse of Credit Suisse could have caused economic turmoil and also huge collateral damage to the financial market of Switzerland and the probable ‘risk of contagion’ to other banks including the UBS Group.
She also added that the merger has laid the foundation for better economic stability not only in Switzerland but at an international level.
The deal was welcomed with a positive response internationally. The decision was appreciated by the European Central Bank chief Christine Lagarde. He stated that the decision will pave the way for restoring orderly market conditions and also ensuring financial stability.
The US Federal Reserve chair Jerome Powell also appreciated the thoughtful decision by the banking firms and the Swiss authorities in their decision to support financial stability.