UBS set to take over Credit Suisse in “emergency rescue”
20 March 2023 Switzerland
Image: vchalup
UBS is set to acquire its Swiss competitor Credit Suisse, as part of a government-backed “emergency rescue,” to restore investor confidence after its shares dramatically slumped in recent days.
The mandate was signed without approval of shareholders, under emergency orders issued by the Swiss Federal Council, yesterday (Sunday 19 March).
The rise in interest rates, due to wider geopolitical turmoil including, but not limited to the Russian invasion of Ukraine, has hit the value of investments across the world. This has underpinned a lack of investor confidence and bank share prices.
As the Swiss regulator, FINMA explains: “Credit Suisse Group is experiencing a crisis of confidence, which has manifested in considerable outflows of client funds. This was intensified by the upheavals in the US banking market in March 2023.
“There was a risk of the bank becoming illiquid, even if it remained solvent, and it was necessary for the authorities to take action, in order to prevent serious damage to the Swiss and international financial markets.”
UBS obtained pre-agreement for the purchase of Credit Suisse from FINMA, the Swiss National Bank and the Swiss Federal Department of Finance.
“Let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue,” affirms chairman of UBS, Colm Kelleher. “We have structured a transaction which will preserve the value left in the business, while limiting our downside exposure.”
Kelleher will become chairman of the new entity, while UBS group CEO Ralph Hamers will be group CEO of the combined business.
UBS says the acquisition will strengthen its position as the leading Swiss-based global wealth manager with more than US$3.4 trillion in invested assets on a combined basis.
The combination of the two companies is expected to generate an annual run-rate of cost reductions of more than US$8 billion by 2027.
The purchase of Credit Suisse is not subject to shareholder approval as it is a government-backed deal.
Commenting further on the emergency mandate, FINMA, the Swiss regulator, says: “FINMA welcomes the takeover solution and the measures taken by the Swiss Confederation and the Swiss National Bank. The transaction and the measures taken will ensure stability for the bank’s customers and for the financial centre.”
Credit Suisse’s Hamers adds: “Bringing UBS and Credit Suisse together will build on UBS’s strengths and further enhance our ability to serve our clients globally and deepen our best-in-class capabilities. The combination supports our growth ambitions in the Americas and Asia, while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks.”
UBS’ purchase of Credit Suisse comes in the same month of the Silicon Valley Bank collapse, which, according to The Guardian, is due to a combination of “the result of Trump-era regulation rollbacks, risk mismanagement at the bank [and] sharp interest rate rises.”
Asset Servicing Times’ sister publication Securities Finance Times highlighted the weaknesses in equity finance businesses back in issues 284 and 289, with detailed analysis about significant cross-firm deficiencies that became apparent in the wake of the default of Archegos Capital Management.
The mandate was signed without approval of shareholders, under emergency orders issued by the Swiss Federal Council, yesterday (Sunday 19 March).
The rise in interest rates, due to wider geopolitical turmoil including, but not limited to the Russian invasion of Ukraine, has hit the value of investments across the world. This has underpinned a lack of investor confidence and bank share prices.
As the Swiss regulator, FINMA explains: “Credit Suisse Group is experiencing a crisis of confidence, which has manifested in considerable outflows of client funds. This was intensified by the upheavals in the US banking market in March 2023.
“There was a risk of the bank becoming illiquid, even if it remained solvent, and it was necessary for the authorities to take action, in order to prevent serious damage to the Swiss and international financial markets.”
UBS obtained pre-agreement for the purchase of Credit Suisse from FINMA, the Swiss National Bank and the Swiss Federal Department of Finance.
“Let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue,” affirms chairman of UBS, Colm Kelleher. “We have structured a transaction which will preserve the value left in the business, while limiting our downside exposure.”
Kelleher will become chairman of the new entity, while UBS group CEO Ralph Hamers will be group CEO of the combined business.
UBS says the acquisition will strengthen its position as the leading Swiss-based global wealth manager with more than US$3.4 trillion in invested assets on a combined basis.
The combination of the two companies is expected to generate an annual run-rate of cost reductions of more than US$8 billion by 2027.
The purchase of Credit Suisse is not subject to shareholder approval as it is a government-backed deal.
Commenting further on the emergency mandate, FINMA, the Swiss regulator, says: “FINMA welcomes the takeover solution and the measures taken by the Swiss Confederation and the Swiss National Bank. The transaction and the measures taken will ensure stability for the bank’s customers and for the financial centre.”
Credit Suisse’s Hamers adds: “Bringing UBS and Credit Suisse together will build on UBS’s strengths and further enhance our ability to serve our clients globally and deepen our best-in-class capabilities. The combination supports our growth ambitions in the Americas and Asia, while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks.”
UBS’ purchase of Credit Suisse comes in the same month of the Silicon Valley Bank collapse, which, according to The Guardian, is due to a combination of “the result of Trump-era regulation rollbacks, risk mismanagement at the bank [and] sharp interest rate rises.”
Asset Servicing Times’ sister publication Securities Finance Times highlighted the weaknesses in equity finance businesses back in issues 284 and 289, with detailed analysis about significant cross-firm deficiencies that became apparent in the wake of the default of Archegos Capital Management.
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