(Reuters) – UBS AG was mulling a takeover of its embattled Swiss peer Credit Suisse on Saturday, sources said, which could allay fears that an unfolding crisis at the bank might destabilise the global financial system.
Developments
* A takeover of Credit Suiss by UBS could see the Swiss government offer a guarantee against the risks involved, said two people with knowledge of the matter on Saturday.
* The boards of both banks were set to meet separately over the weekend, with one source saying that Swiss regulators are encouraging the pair to merge but neither bank wants to do so.
* At least four major banks, including Societe Generale and Deutsche Bank, are restricting new trades involving Credit Suisse or its securities, five sources told Reuters.
* U.S. investment giant BlackRock denied a report in the Financial Times that it was participating in a rival bid for all or parts of Credit Suisse.
* ECB Governing Council member Pierre Wunsch said he did not expect a repeat of the 2008 financial crisis despite turbulence caused by the collapse of Silicon Valley Bank, saying European banks were subject to tougher rules than regional U.S. banks.
* Goldman Sachs cut its recommendation on exposure to European bank debt to neutral from overweight, saying a lack of clarity on Credit Suisse’s future path would put pressure on the broader sector.
* SVB Financial Group filed for a court-supervised reorganisation under Chapter 11 bankruptcy protection to seek buyers for its assets, days after regulators took over its former unit Silicon Valley Bank (SVB).
* The U.S. Federal Deposit Insurance Corp (FDIC) is considering steps to facilitate takeovers of Signature Bank and Silicon Valley Bank, a source told Reuters.
* Moody’s downgraded First Republic Bank’s debt. Before the announcement, the bank’s shares plunged nearly 33%, capping an 80% wipeout over 10 sessions, despite a rescue package with $30 billion in deposits injected by large U.S. banks.
* U.S. President Joe Biden urged Congress to give bank regulators greater power.
* A senior People’s Bank of China official said the collapse of SVB showed how rapid monetary policy shifts were having spillover effects, state-owned newspaper Shanghai Securities News reported.
Markets
* Investor sentiment remained fragile on Friday, leaving global equities under pressure while gold prices posted their largest one-week rally in three years. The dollar slipped and Treasury yields fell.
* As worries over banks swirl, investors are seeking protection against a market crash.
(Compiled by William Mallard, Kirsten Donovan and Hugh Lawson)
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UBS, Switzerland’s biggest bank, is currently weighing up a takeover of its rival Credit Suisse. This potential move comes as a direct result of controversial changes in banking laws in the United States, which could seriously impact the profitability of the two Swiss banks.
Changes to the Volcker Rule, part of the banking regulation passed by the U.S. Congress in 2010, means that UBS and Credit Suisse will no longer be able to trade their own stocks in the United States. This, coupled with the continued uncertainty around Brexit, has put pressure on the two banks to explore a potential merger.
UBS and Credit Suisse have had a long history of competing for business in Switzerland and abroad. Credit Suisse is the second-largest bank in Switzerland and is, in many ways, seen as UBS’s closest rival. A merger would provide the companies with an opportunity to become a much larger force in the banking sector, and potentially make them more profitable.
The potential merger has been met with some resistance from shareholders and employees. Those opposed to the deal feel it could lead to job losses and a reduced focus on customers. In addition, some analysts fear it could lead to a loss of competition in the Swiss market and eventually higher fees being charged by the remaining banking powerhouse.
UBS and Credit Suisse have said they will assess each other’s financial situation before deciding whether a takeover is a viable option. However, with the recent changes in US banking regulations, UBS appears to be in the driving seat and could take advantage of Credit Suisse’s weakened financial position.
The outcome of the takeover will have a big impact on the banking industry in Switzerland and beyond. It could mean a larger, more powerful bank or an industry still dominated by two Swiss giants. Whatever the result, it is likely to reverberate up and down the banking sector for years to come.
