Credit Suisse bank logo in Zurich on March 18, 2023.
Bern/Zurich/Washington/London – Authorities in Switzerland are still trying to negotiate the rescue of Credit Suisse. Negotiations are getting complicated, the union of bank employees has called for the immediate establishment of a working group to help colleagues whose jobs are at risk, Reuters reported today. The government prefers that the bank be taken over by its main domestic rival – the largest Swiss bank UBS. According to sources in the Financial Times (FT), it is willing to pay a maximum of one billion dollars (CZK 22.5 billion) in shares, which Credit Suisse does not want to do, according to Bloomberg sources. The banks refused to comment on the source information.
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The FT's sources also said that the Swiss authorities were preparing to change the laws so that they could implement the required changes as quickly as possible without having to wait for shareholder approval. According to the current legislation, they would have to discuss the proposal and then vote on it. According to the sources, UBS management is not very keen on taking over Credit Suisse, but according to them, the government is pushing for this solution. If UBS finally agrees to take over Credit Suisse, the second largest Swiss bank, around 10,000 jobs are at risk, according to sources.
UBS proposed this morning to pay 0.25 Swiss francs for each Credit Suisse share, according to FT sources. This is well below Friday's closing share price on the exchange, which was CHF 1.86. Over the past week, Credit Suisse shares have written off a quarter of their value, even before the global financial crisis in 2007 they were selling for up to 90 CHF.
The fate of Credit Suisse is now in the hands of only a handful of people, among them politicians, economists and mathematicians , which assesses whether the once prestigious bank has any chance of getting out of trouble on its own. It got into them because of the wrong decisions of the past and especially because of the loss of confidence that culminated this week and which started a massive outflow of client deposits.
The result of the current extraordinary negotiations will very likely be an agreement on the breakup of Credit Suisse Group AG – a financial institution that was founded 167 years ago. As Bloomberg wrote, it is a “dramatic fall of a titan of the all-powerful Swiss banking industry”.
The negotiations are mainly about the conditions under which UBS will be willing to save the bank in trouble. The government is keen to ensure that the crisis of confidence does not spread to the entire banking sector on which Switzerland depends. According to sources, UBS is asking the government to guarantee an amount of approximately six billion dollars (CZK 135 billion) for the costs that UBS anticipates in this connection. It is mainly about the termination of the activities of some parts of Credit Suisse, but UBS is also concerned about the attitude of the regulatory authorities and the legal disputes that it expects.
The negotiations so far have mainly come down to difficulties surrounding Credit Suisse's investment arm and its trading division, Bloomberg reported. It is the investment component that is at the center of the scandals that Credit Suisse has faced in recent years. UBS is examining the risks associated with investments that use credit financing, according to sources. They have been scrutinized by regulators.
Swiss regulators are trying to come up with a solution for Credit Suisse before it opens for trading on exchanges in Asia on Monday morning. There are fears that if the matter is not resolved even then, jitters will reign in the markets and the major stock indexes will weaken sharply. This would mean economic losses for individuals, companies and governments.
Credit Suisse's years-old problems are escalating at a time when some banks in the United States have run into trouble. The administration of US President Joe Biden has decided that all depositors will get their deposits back from the US financial institutions Silicon Valley Bank (SVB) and Signature Bank beyond the statutory insurance. The Swiss central bank also decided to take decisive action, making 50 billion francs (CZK 1.2 trillion) available to the financial institution Credit Suisse to immediately boost liquidity.
Credit Suisse is one of the largest asset managers in the world, provides services primarily to wealthy individuals, and is considered one of the thirty systemically important banks in the global financial architecture. For this reason, the negotiations in Switzerland are also closely watched by regulatory authorities in Britain, Germany, the United States and other large countries.
First Citizens BancShares is considering an offer for the bankrupt SVB bank
American bank holding company First Citizens BancShares is considering making an offer to buy the bankrupt Silicon Valley Bank (SVB). This is reported today by the Bloomberg agency, according to which there is one more serious candidate in the game.
Offers for the takeover of the bank, over which the American Federal Deposit Insurance Corporation (FDIC) has control after the collapse, are to be submitted by today morning local time (afternoon CET). Based on them, the FDIC will decide whether to go the route of selling the entire financial company or dividing it into parts.
American authorities closed SVB last week. It was the largest bank failure in the US since the height of the financial crisis in 2008. Last weekend, the US authorities also took control of the Signature Bank financial institution, which raised concerns on the financial markets about the future development of the banking sector.
SVB lent money mainly to start-up technology companies, so-called start-ups. She estimated the value of assets and liabilities at up to ten billion dollars, liquidity at around USD 2.2 billion. At the end of last year, it had assets worth 209 billion dollars.
