UBS will take over Credit Suisse, Swiss central bank says | CBC News

UBS will take over Credit Suisse, Swiss authorities said on Sunday, to help rescue the embattled lender.

“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss central bank and other authorities said.at a press conference late Sunday.

More to come.

Swiss leaders are holding a news conference Sunday night following several media reports that banking giant UBS is believed to be in talks to acquire its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking. 

The Federal Council, the seven-member governing body that includes Swiss President Alain Berset, is expected to Credit Suisse’s fate announce that UBS is acquiring Credit Suisse in a potential deal brokered by the Swiss government.

Sunday’s news conference follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. Still, global financial markets have been on edge since Credit Suisse’s share price began plummeting this week. 

The press conference comes just days after the 167-year-old Credit Suisse received a $50 billion US ($68.6 billion Cdn) loan from the Swiss National Bank, which briefly caused a rally in the bank’s stock price. Yet the move did not appear to be enough to stem an outflow of deposits, according to news reports. 

Still, many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corporation and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008. 

The press conference caps a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10 per cent. 

On Friday, shares dropped 8 per cent to close at 1.86 francs ($2.76 Cdn) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.

Its current troubles began after Credit Suisse reported on Tuesday that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned fears that Credit Suisse would be the next domino to fall. 

While smaller than its Swiss rival UBS, Credit Suisse is considered a global systemically important bank. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major adviser for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did. 

Despite the banking turmoil, the European Central Bank (ECB) on Thursday approved a large, half-percentage point increase in interest rates to try to curb stubbornly high inflation, saying Europe’s banking sector is “resilient,” with strong finances. ECB President Christine Lagarde said the banks “are in a completely different position from 2008” during the financial crisis, partly because of stricter government regulation.

The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.