Swiss bank was bought by UBS for US$ 3.23 billion in a deal announced on Sunday (19.mar)
Global markets began to fall this Monday (20.Mar.2023), the day after the purchase agreement for the Credit Suisse by swiss bank UBS, its biggest domestic competitor in the banking sector. The purchase was closed for US$ 3.23 billion after 3 days of negotiations.
On the morning of this Monday (March 20), the stock markets in Hong Kong (-2.65%), London (-0.92%), Tokyo (-1.42%), Sydney (-1.38%) and Shanghai (-0.48%) opened lower. In the Swiss market, shares fell 1.8%.
Shares in Credit Suisse were down 63% in early trading, while its buyer, UBS, fell 14% on the Zurich stock exchange.
The main fear of investors is that the financial system is on the preludes of a global crisis after the failures of SVB (Silicon Valley Bank) and Signature Bank in the last week, followed by the crisis that hit the 2nd largest bank in Switzerland.
“Following the extraordinary action in US bond prices over the past week, investors are waiting to see where the dust settles in the banking saga before making any bold moves.”analyzed Stephen Innes, from SPI Asset Management, in a report released this morning.
According to a press release from Credit Suisse (full-122KB), the Swiss Federal Council approved an emergency decree to speed up the negotiations. The merger will be implemented without the necessary approval of the banks’ shareholders. They justify the decision because of the consequences that a delay would bring to the Swiss and global market.
The Swiss Central Bank offers $108 billion in liquidity line to UBS. The government stipulates a guarantee of 9 billion Swiss francs against possible losses of assets in the company after the companies merge.
Negotiations for a possible purchase by UBS began after Credit Suisse said it had identified “material weaknesses” in your financial reports for the past 2 years.
The 2 banks are competitors in Switzerland. A total or partial merger between them increases the power in a single financial institution. The sources heard by the newspaper Financial Times said Swiss regulators crafted the deal to provide maximum stability to Switzerland’s banking system.
European and US officials are watching the Credit Suisse situation closely. After the US banks went bankrupt, the market became more cautious of the situation of banks going through turmoil.
As the two North American institutions were smaller and focused on investments in startups, the spread of the crisis brought less concern. Credit Suisse however is one of the biggest banks in Europe. Active since 1856, bankruptcy would have far-reaching consequences.
#Market #falls #dawn #purchase #Credit #Suisse