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UBS, Switzerland’s largest bank, will buy beleaguered rival Credit Suisse in the biggest deal yet meant to soothe the nerves of global investors, already jittery since the failure of Silicon Valley Bank in February.
Here’s a look at how important Credit Suisse is, how it fell over a long period of time in the making, and what the deal will look like.
Credit Suisse is the 45th largest bank in the world in terms of total assets, according to S&P Globalwith an estimated $1.1 trillion in assets. UBS has approximately $1.5 trillion in assets, in 2021. Credit Suisse is one of the banks considered “systemically important” by the Financial Stability Board – which oversees the international banking system – due to its links to the global economy.
Credit Suisse is among only 30 banks to be awarded the distinction, along with JPMorgan Chase in the US, TD Bank in Canada, and several banks in China.
Credit Suisse’s downfall came after the Silicon Valley bank’s failure sent a chill through global banking, but the former’s death is long overdue.
The bank was linked to two financial companies that collapsed within a few weeks of 2021. The failure of Greensill Capital and Archegos Capital Management left the bank with billions of dollars.
Since then, it has been a turbulent few years for the 187-year-old institution. For example, last year, it was the focus of media reports recommended bank clients include human rights abusers, fraudsters and those under sanctions.
Fast forward to this year. After the collapse of Silicon Valley Bank, fears spread about the health of the world’s financial institutions. Worried investors began pulling funds from the Swiss lender and share prices fell sharply. A bailout of the Swiss National Bank worth more than $68 billion US last week was not enough to calm investors.
UBS will buy Credit Suisse for 3 billion Swiss francs (about $4.4 billion Cdn), and UBS shareholders will take a massive hit. Shareholders will get one share of UBS for every 22.48 Credit Suisse shares.
“This is a historic day in Switzerland, and a day to be honest, we hope, will never come,” UBS Chairman Colm Kelleher told analysts on a conference call.
“I want to make it clear that while we have not started discussions, we believe that this transaction is attractive to UBS shareholders.”
The deal is expected to close by the end of 2023.
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