Swiss regulators – the central bank (SNB) and the financial market watchdog (Finma) – told their American and British colleagues that the takeover by UBS was “their plan A” to stop the crisis of confidence from which Credit Suisse is suffering, writes the FT, citing an unnamed source with knowledge of the talks.
The Swiss central bank “wants a simple solution before the markets open on Monday”, assures the business daily, which recognizes that it is not certain that an agreement can be found.
UBS wants to assess what risks a full or partial takeover of its rival might pose to its own business, another anonymous source told the FT.
Questioned by AFP, the SNB replied that it “does not comment” just like Credit Suisse. UBS and Finma did not immediately respond to requests.
Credit Suisse has been in turmoil for two years, but things accelerated on Wednesday when investors – shaken by the bankruptcy of Silicon Valley Bank in the United States – sold off shares of the second Swiss bank.
Credit Suisse is considered a weak link in the banking sector since a series of scandals and a restructuring plan that is struggling to convince.
At the end of the day on Wednesday, the market capitalization of the Zurich bank was less than 7 billion Swiss francs, a paltry sum for one of the 30 banks in the world considered too big to let them fail.
On Wednesday evening, following being silent all day, the Swiss central bank offered verbal support and offered liquidity.
On the night of Wednesday to Thursday, Credit Suisse borrowed 53 billion Swiss francs from it to give itself a breath of fresh air and move forward in its restructuring.
For the SNB, it was a matter of reassuring markets around the world.
It worked for a while, but the stock fell more than 8% on Friday.
This bank, founded in 1865, which was a key player in the Swiss economic miracle, is only worth 8 billion Swiss francs on the stock market, when UBS is worth 56.6 billion.
Frequent assumption
the hypothesis of a takeover of Credit Suisse by a bank had also been mentioned by analysts at JP Morgan this week, “with UBS as a potential option”.
Given the weight that this merger would confer on the two banks, they imagine that the Swiss branch of Credit Suisse, which includes retail banking and loans to SMEs, might be listed on the stock market or split up.
With its stock crashing to an all-time low of 1.55 Swiss francs on Wednesday, Credit Suisse’s market capitalization has melted, potentially making the bank easy prey to absorb.
The idea of a merger of the two largest Swiss banks resurfaces regularly, but is generally dismissed because of competition issues and the risks for the stability of the Swiss financial system given the weight that a merger would give them.
As for UBS, it has spent several years recovering from its severe crisis in 2008, and it is not sure that it wants to embark on a new restructuring now that it is beginning to reap the fruits of its efforts.