Credit Suisse engage in make-or-break talks over UBS merge pressure

By Al Mayadeen English
Source: Agencies
18 Mar 2023 12:53
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UBS and Credit Suisse are being encouraged by Swiss regulators to merge despite the fact that neither bank wants to.

The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021. (Reuters)

Credit Suisse Group AG engaged in make-or-break meetings over the weekend after rivals grew cautious in their dealings with the bank amid pressures by regulators to merge with Swiss rival UBS AG.

The meetings were held to assess strategic scenarios for the 167-year-old bank, amid market turmoil unleashed by the collapse of US lenders Silicon Valley Bank and Signature Bank last week. This forced the Swiss bank to tap $54 billion in central bank funding.

UBS and Credit Suisse are being encouraged by Swiss regulators to merge despite the fact that neither bank wants to. The regulators, however, do not have the authority to force the banks to merge.

According to the Financial Times, UBS and Credit Suisse boards were expected to meet over the weekend. After Credit Swisse shares jumped 9% in after-market trading following the FT report, both Credit Swisse and UBS declined to comment.

At least four major banks, including Societe Generale SA (SOGN.PA) and Deutsche Bank AG (DBKGn.DE), placed restrictions on their trades involving Credit Suisse, as reported by five people with direct knowledge of the matter.

"The Swiss central bank stepping in was a necessary step to calm the flames, but it might not be sufficient to restore confidence in Credit Suisse, so there’s talk about more measures," said Frederique Carrier, head of investment strategy at RBC Wealth Management.

Both the European Central Bank and US President Joe Biden sought to reassure investors and depositors that the global banking system is safe. Nevertheless, fears in the sector remained.

Big US banks provided a $30 billion lifeline this week for smaller lenders, while US banks altogether sought a record $153 billion in emergency liquidity from the Federal Reserve.

President Biden asked Congress to give regulators greater power over the banking sector to prevent any more failed banks.

Fears linger, still

Global banking stocks have been shaken since Silicon Valley collapsed, raising concerns about the presence of weaknesses in the financial system.

Regional bank shares in the US fell sharply on Friday by 4.6%; their decline over the past two weeks reached up to 21.5%, marking their worst two-week calendar loss since the COVID-19 pandemic in march 2020.

First Republic's collapse was prevented due to support provided by the biggest names in the US banking system. As such, investors were startled.

SVB Financial Group filed for bankruptcy days after regulators took over its Silicon Valley Bank unit. Regulators asked banks who may be interested in buying SVB and Signature Bank to submit bids by Friday.

In order to allow smaller banks to participate in the auctions for the collapsed bank, regulators are thinking about retaining ownership of securities owned by Signature and SVB.