Credit Suisse bank logo in Zurich on March 18, 2023.
Bern/Zurich/Washington/London – Switzerland is considering the full or even partial nationalization of Credit Suisse if it does not agree with the financial institution UBS on its takeover. Referring to its sources, Bloomberg reported about it today. The Swiss Ministry of Finance refused to comment on the report, but the local media immediately reported, without elaborating, that the government was preparing a press conference with important content. Authorities are still trying to negotiate a bailout for Switzerland's troubled second-largest bank.
The rescue negotiations started to get complicated in the morning, as the bank employees' union called for the immediate establishment of a working group to help colleagues who are likely to lose their jobs, Reuters reported. 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. Banks declined to comment on the sources' information.
Tron cryptocurrency founder Justin Sun then announced on Twitter in the afternoon that he is willing to buy Credit Suisse for USD 1.5 billion (CZK 33.7 billion) and incorporate it into the web3, which is decentralized network in the middle of cryptocurrency. “Switzerland is one of the most cryptocurrency-friendly countries,” he wrote.
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, Switzerland's second largest bank, 9,000 to 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. Credit Suisse shares have lost a quarter of their value in the past week, trading as low as CHF 90 before the 2007 global financial crisis.
The fate of Credit Suisse is now in the hands of only a handful of people, among them politicians, economists and mathematicians, who assess 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. an institution that was established 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. The regulatory authorities took a detailed interest in them.
Swiss regulators are trying to come up with a solution for Credit Suisse before trading on exchanges in Asia opens 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. That would mean economic losses for individuals, companies and governments.
Credit Suisse's years-long 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, services it provides 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.