In the News
2023 Banking Crisis - Credit Suisse rescued by Swiss rival UBS
20th March 2023
Here are details of the emergency and rushed rescue of Credit Suisse by its Swiss rival UBS. The Swiss have taken pre-emptive action to prevent the collapse of Credit Suisse, with banking giant UBS stepping in, with the support of the Swiss government.
The FT reports that "the Swiss central bank stepped in to force a merger after becoming concerned about the viability of the country’s second-largest lender."
The Guardian reports that "years of scandals at Credit Suisse eroded its reputation and profitability, before a sharp loss of confidence among investors last week threatened its viability."
The President of Swiss Federal Council is reported as saying that the move comes after it became clear “it was not possible to restore confidence… It would have had unthinkable consequences for our country and the international financial system.”
This is what the final deal looks like: UBS to buy Credit Suisse for CHF0.76 per share, or CHF3bn. Credit Suisse holders will get 1 UBS share for every 22.48 shares. UBS says Ralph Hampers will be CEO of combined bank. Complete write-down of nominal value of all AT1 shares of CS. pic.twitter.com/nJYVbYLJ6A
— Holger Zschaepitz (@Schuldensuehner) March 19, 2023
Are there significant systemic risks involved? Holders of $17bn of Credit Suisse bonds will have their investment wiped out following the bank’s takeover by UBS.
Holders of $17bn of Credit Suisse bonds wiped out under UBS takeover https://t.co/kPkkd5oNP2
— Financial Times (@FinancialTimes) March 19, 2023
Is Credit Suisse’s demise a harbinger of doom for Europe’s banks? https://t.co/mwNOA66kPi
— Finance News (@ftfinancenews) March 20, 2023
The Guardian asks - are we in a banking crisis?
Explainer: are we in a banking crisis? https://t.co/B4owY64SoL
— Guardian Business (@BusinessDesk) March 20, 2023
Robert Peston on the scale of the write down of the book value of Credit Suisse.
The price tag of $2bn for Credit Suisse compares with its shareholders’ equity of almost $50bn at the end of 2022. The price is 4% of book, a valuation that implies rather too much of its $570bn in assets are radioactive and toxic. Eek. This is not just a liquidity problem
— Robert Peston (@Peston) March 19, 2023
Ed Conway (Sky) on the response by central banks to maintain liquidity in the wider banking system and minimise the risks from a credit crunch.
Major central banks around the world, including the @bankofengland, open swap lines to keep dollars flowing around the world. A reminder that when a big systemic bank like Credit Suisse implodes, the global financial system gets that bit more vulnerable pic.twitter.com/UJ3pC8pKaN
— Ed Conway (@EdConwaySky) March 19, 2023
A blunt fact remains when you step back from all the details on @CreditSuisse-@UBS deal#Switzerland's second-largest bank--a bank that opened its doors for business in 1856 and was one of the 30 systemically important #banks around the world--will no longer exist as a standalone
— Mohamed A. El-Erian (@elerianm) March 19, 2023
US banks are scrambling to take the liquidity support on offer from the Federal Reserve.
Not a pretty picture. US banks’ usage of emergency support from Federal authorities. Chart: @Gavekal pic.twitter.com/vjOcrGnp5v
— Ed Conway (@EdConwaySky) March 20, 2023
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.
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