The largest bank in Switzerland, UBS, made the decision on Sunday to acquire its ailing rival Credit Suisse for about $3.2 billion as part of the effort to quell the financial panic that has engulfed the world over the past week.
The shocking demise of the 166-year-old institution, which was once a source of Swiss pride, is signaled by the deal, which the Swiss government achieved within a few days.
The global banking industry may have undergone its largest restructuring since the 2008 financial crisis, when rivals bought up bankrupt financial behemoths to avert catastrophic failures.
According to Colm Kelleher, chairman of UBS, “This is a historic day in Switzerland, but frankly, a day we hoped would not come,” he remarked on Sunday.
Officials and regulators from the Swiss government claim that the deal is the best way to reassure investors about the stability of the country’s financial sector and the possibility that its issues won’t spread outside.
UBS’ acquisition of Credit Suisse, according to Swiss Federal Council member Karin Keller-Sutter, “has set the foundation for increased stability both in Switzerland and worldwide.”
In a joint statement, Janet Yellen, the Treasury secretary, and Jerome Powell, the head of the Federal Reserve, said, “We welcome the announcements by the Swiss authorities today to promote financial stability.
The deal values Credit Suisse at approximately $3.2 billion (or 3 billion Swiss francs), which is a small percentage of its Friday market value. In exchange, UBS will exchange 0.76 of one of its shares for each share of Credit Suisse.
Credit Suisse, which was established in 1856 to finance Switzerland’s rail system, reached the pinnacles of the financial industry and periodically faced up against American behemoths like JPMorgan Chase.
Yet, the Zurich-based bank has endured decades’ worth of scandals, management adjustments, and reform measures that have damaged its reputation, attracted judicial attention, and left it bleeding from losses.
By putting its long-standing vulnerabilities in harsh perspective and hastening its downfall, the current decline in banking equities, which was caused by Silicon Valley Bank’s failure last month, emphasized how fearful investors are.