UBS would be able to reduce the size of Credit Suisse’s investment bank as a result of the purchase, with the combined firm constituting no more than a third of the newly combined business. A merger between UBS and Credit Suisse would result in the creation of one of the biggest and most systemically significant financial institutions in Europe. UBS has total assets on its balance sheet worth $1.1 trillion, while Credit Suisse has total assets at $575 billion.
Bypassing the typical Swiss regulations that call for a six-week consultation period during which shareholders can express their opinions on an acquisition, the emergency measures that are currently being considered would make it possible for the transaction to move forward without the approval of the company’s shareholders. Reportedly, the SNB and FINMA are aiming to secure a regulatory agreement by the end of the day on Saturday in order to conclude the purchase before to the opening of markets on Monday.
Credit Suisse has been shaken by a slew of financial scandals, the most notable of which are the failure of Greensill Capital, which had a portfolio worth $10 billion with Credit Suisse, and the loss of $4.7 billion as a result of the failure of family office Archegos Capital Management. In addition to this, legal action may be taken against the bank because of its part in the fall of supply chain financing company Lex Greensill’s corporate empire.
The Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) had previously issued a joint statement on March 15, stating that Credit Suisse met the requirements imposed on systemically important banks regarding their capital and liquidity, and that should it be required, the SNB would provide Credit Suisse with liquidity. But, the authorities now feel that the only option to avert a complete collapse in trust in the bank is for UBS to purchase Credit Suisse.
The announcement of this news comes after the United States-based investment firm BlackRock indicated in a tweet on March 18 that it is not interested in purchasing Credit Suisse.