UBS takeover Credit Suisse: 10 things to know about the historic deal

10 things to know about this historic deal

1) The Swiss bank is paying 3 billion francs ($3.3 billion) for its rival in an all-share deal that includes extensive government guarantees and liquidity provisions. Credit Suisse’s 2007 peak saw a 99% drop in per share value.

2) The deal followed the collapse of two big US banks last week, prompting a frantic, sweeping response from the US government to prevent any further panic.

3) As part of the deal, about 16 billion francs ($17.3 billion) in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of crisis. But these bonds are designed to be liquidated if a bank’s capital falls below a certain level, which was triggered as part of this government-brokered deal.

4) The combination of the two largest and best-known Swiss banks, each with a history dating back to the mid-19th century, amounts to a thunderclap to Switzerland’s reputation as a global financial center – leaving it at the cusp of being a single national Except the champion in banking.

5) credit Suisse It is one of 30 financial institutions globally known as systemically important banks, and authorities worry about the fallout if it fails.

6) Following news of the Swiss deal, the world’s central banks announced coordinated financial steps to stabilize banks in the coming week. This includes daily access to a lending facility for banks seeking to borrow US dollars when needed, a practice that was widely used during the 2008 financial crisis.

7) Three months after the collapse of Lehman Brothers in September 2008, such swap lines were tapped for $580 billion. Additional swap lines were also introduced in March of 2020 during the market turmoil in the early stages of the COVID-19 pandemic.

8) Many of Credit Suisse’s problems are unique and do not overlap with Silicon Valley Bank and the weaknesses that brought down the bank. signature bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corporation and the Federal Reserve. As a result, their collapse does not necessarily signal the start of the 2008 financial crisis.

9) Its current troubles began after Credit Suisse reported on Tuesday that managers had identified “material weaknesses” in the bank’s internal controls over financial reporting as late as last year. This led to fears that Credit Suisse would be the next domino to fall.

10) Credit Suisse has been designated by the Financial Stability Board, an international body that oversees the global financial system, as one of the world’s most important banks. This means that regulators believe that its uncontrolled failure will create ripples throughout the financial system, not unlike the collapse of Lehman Brothers 15 years ago.