Switzerland’s two biggest banks, UBS and Credit Suisse, are set to merge in an all-share deal worth over $2 billion, according to reports by the Financial Times.
Update: UBS has agreed to acquire Credit Suisse for 3 billion Swiss francs ($3.2 billion) with the intervention of Swiss regulators, as governments seek to prevent the spread of a crisis threatening the global banking system. According to a statement from the Swiss National Bank, the takeover of Credit Suisse by UBS will ensure financial stability and safeguard the Swiss economy during this unprecedented time. The country’s two largest banks will be combined with the cooperation of the Swiss government and the Swiss Financial Market Supervisory Authority.
The deal is expected to be signed as early as Sunday evening and would allow Swiss authorities to bypass a shareholder vote, as they rush to finalize the transaction before Monday. The agreement is said to be priced at a fraction of Credit Suisse’s closing price on Friday, thereby wiping out most of its shareholders.
The merger is heavily influenced by the Swiss National Bank and regulator Finma, with limited contact between the two lenders, the report added. The US Federal Reserve has also given its assent to the deal progressing. Under the new agreement, UBS will pay more than SFr0.50 a share in its own stock, which is far below Credit Suisse’s closing price of SFr1.86 on Friday. UBS has also agreed to a softening of a material adverse change clause that would void the deal if its credit default spreads jump.
However, some have criticized the plans to void normal corporate governance rules by preventing a UBS shareholder vote. Vincent Kaufmann, the chief executive of Ethos Foundation, which represents Swiss pension funds that own between 3% and 5% of Credit Suisse and UBS, told the Financial Times that the move was poor corporate governance.
The SNB had earlier provided Credit Suisse with an emergency SFr50bn ($54bn) credit line when the bank’s share price fell and clients withdrew their money. Despite this, deposit outflows from Credit Suisse exceeded SFr10bn a day last week, while customers withdrew SFr111bn from the bank in the final three months of last year.
UBS is seeking concessions and protections from the government, especially from any pending legal cases and regulatory investigations into Credit Suisse that could result in fines or losses. The bank is also requesting permission to phase in any extra demands it would face under global rules on capital that govern the world’s largest banks.
The Swiss cabinet has assembled in the finance ministry in Bern for a series of presentations from government officials, the SNB, Finma, and representatives of the banking sector. The government is preparing emergency measures to fast-track the takeover and intends to introduce legislation that will bypass the normal six-week consultation period required for UBS shareholders so that the deal can be sealed immediately.
Justin Sun, the founder of Tron, has made a bid to acquire Credit Suisse for $1.5 billion and integrate it into the Web3.0 world, according to AZCoin News. Sun’s goal is to create a more innovative and decentralized financial system by leveraging the potential of blockchain technology and cryptocurrencies. Switzerland is known for being a crypto-friendly country, and Sun believes that integrating Credit Suisse into a crypto-friendly financial institution could help pave the way for this future.
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