UBS’s potential takeover of Credit Suisse: What you need to know

Switzerland-based Credit Suisse was caught up in the turmoil sparked by the collapse of US lenders Silicon Valley Bank and Signature Bank last week.

Multinational investment bank UBS has reportedly asked the Swiss government to cover about $6 billion in costs if it were to buy competitor Credit Switzerland.

Authorities scramble to resolve a crisis of confidence in the 167-year-old Swiss-based organization, the world’s most important bank caught in the turmoil triggered by the collapse of US lenders Silicon Valley Bank and Signature Bank the past weeks.

Here’s what you need to know about the potential takeover:

What’s the latest with the negotiations?

  • The guarantees that UBS is seeking will cover the costs of winding up parts of Credit Suisse and potential litigation costs.
  • UBS, which is also based in Switzerland, was reportedly under pressure from Swiss authorities to acquire its local rival in order to get the crisis under control. The plan could lead to a privatization of Credit Suisse’s Swiss operations.
  • According to news agency Reuters, a source has warned that the talks are facing significant obstacles and that 10,000 jobs may have to be cut if the two banks merge.

  • Switzerland is preparing to use contingency measures to speed up the deal, the Financial Times reported.
  • US authorities are working with their Swiss counterparts to reach a deal, Bloomberg News reported.
  • According to the Swiss newspaper Blick, UBS will buy Credit Suisse in a deal that will be sealed on Sunday at an extraordinary meeting in Bern, where the Swiss government and bank executives meet.
  • There were also multiple reports of interest in Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was considering buying some of its assets.

Why is Credit Suisse in crisis?

  • Credit Suisse shares lost a quarter of their value last week.
  • The bank was forced to tap $54 billion in central bank funding as it attempted to recover from a series of scandals that undermined investor and customer confidence.
  • Credit Suisse has been plagued by a series of scandals in recent years. The shares were worth 12.78 Swiss francs ($13.84) in February 2021.
  • In 2022, the bank suffered a net loss of $7.9 billion and expects a “significant” pre-tax loss this year.

How important is Credit Suisse?

  • Credit Suisse is among the world’s largest asset managers and, crucially, it is one of 30 globally systemically important banks whose failure would send ripples throughout the financial system.
  • Credit Suisse has local asset management, investment banking, a local Swiss bank and asset management operations.
  • It has just over 50,000 employees and 1.3 trillion Swiss francs ($1.4 trillion) in assets under management at the end of 2022, up from 1.6 trillion a year earlier.
  • With more than 150 offices in about 50 countries, Credit Suisse is the private bank for a large number of high net worth clients, both individuals and companies.