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Switzerland‘s two largest banks are poised to merge in a deal regulators sought to help create stability as volatility rocks financial institutions around the globe.
UBS, the larger of the pair, agreed on Sunday to buy troubled competitor Credit Suisse for more than $3 billion, according to The Wall Street Journal.
“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” said the Swiss National Bank.
The exact details of the arrangement are not all fully clear, but the Financial Times reported that Swiss authorities were working to speed up the process by changing laws to bypass a shareholder vote.
In addition, the Swiss National Bank said it would offer a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover, and the Swiss government pledged to cover about 9 billion francs ($9.7 billion) worth of potential losses for assets being taken over by UBS, per CNBC.
Swiss President Alain Berset said the deal is “one of great breadth for the stability of international finance,” the Associated Press reported. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
With its shares plummeting by 75% in the past 12 months, Credit Suisse received a lifeline of 50 billion franks, or $54 billion, from the Swiss central bank last week, but CNN reported that did not fully reassure investors. The purchase price reported on Sunday would be less than half the 7.4 billion francs Credit Suisse was worth at the close of trading on Friday, according to Bloomberg News.
Credit Suisse, which is nearly 167 years old, reportedly had about 50,000 employees by the end of 2022 while UBS has about 74,000 employees around the world.
News of the purchase comes after Silicon Valley Bank, Signature Bank, and Silvergate Bank collapsed this month, after which the U.S. federal government took steps to protect depositors.
Treasury Secretary Janet Yellen assured Congress last week that the U.S. financial system “remains sound,” and 11 major banks offered $30 billion in deposits to assist the struggling First Republic Bank.
Billionaire investor Warren Buffett reportedly spoke with Biden administration officials in recent days about contending with the banking crisis, including a possible investment into the U.S. regional banking sector.