UBS will take over its smaller rival Credit Suisse, the Swiss central bank has confirmed, in an effort to avoid further market-shaking turmoil.
The Swiss authorities forced the rescue of Credit Suisse after it suffered a string of high-profile problems in recent years, which led investors to start moving their money out of the Swiss bank.
Swiss President Alain Berset, who did not specify the value of the deal, called Sunday night’s announcement “one of great breadth for the stability of international finance. An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
Here’s what you need to know about Credit Suisse.
What is Credit Suisse?
Credit Suisse is a Swiss bank and was founded in 1856.
Its brand ambassador is tennis champion Roger Federer – but in recent years it has experienced a swathe of problems behind the glamourous exterior. It was plagued by divisive management and expensive exposure to the finance company Greensill Capital, which collapsed in 2021.
The 167-year-old bank was loss-making and last October agreed to pay a fine of €238 million to settle money laundering charges. It also faced declining customer confidence in the last few months and billions we withdrawn from the bank.
The Swiss bank has just under 50,000 staff, about 5,000 of them in the UK.
Who rescued Credit Suisse from collapse?
It was given an emergency $54bn lifeline from the Swiss National Bank on Wednesday in an attempt to reassure markets but Credit Suisse shares tumbled 24 per cent, meaning a rescue deal was needed. The Swiss National Bank said the deal for Credit Suisse was the best way to restore the confidence of financial markets and to manage risks to the economy.
The last-minute deal valued Credit Suisse at just over $3.15 billion (£2.6 billion), a fraction of its $8 billion price tag on Friday.
Following news of the Swiss deal, the world’s central banks, including the Bank of England, announced coordinated financial moves to stabilise banks in the coming week. This includes daily access to a lending facility for banks looking to borrow US dollars if they need them, as happened during the 2008 financial crisis.
The Bank of England said it welcomed the “comprehensive set of actions” set out by the Swiss authorities.
Despite market turmoil in recent weeks, experts are not forecasting a repeat of the 2008 financial crisis
Why is it significant?
Credit Suisse is the latest and most important casualty of a banking crisis of confidence in which two mid-sized US banks have already failed and another has received emergency industry intervention.
But as Switzerland’s second biggest lender, Credit Suisse was considered one of the top 30 most important banks in the world, which explains the speed of the Swiss authorities’ reaction.
A rapid rise in global interest rates has hit the value of safe investments that banks store some of their money in. This scared investors and prompted share prices to tumble with the weakest hit hardest.
In London, it is thought back office and technology jobs at Credit Suisse are likely to be axed.
