UBS Group Pays $3.2 Billion for Credit Suisse in Swiss Regulator-Engineered Deal
On Sunday, Swiss regulators orchestrated a deal in which UBS Group AG (UBSG.S) will purchase Credit Suisse Group AG (CSGN.S) for 3 billion Swiss francs ($3.2 billion). The 167-year-old Credit Suisse was once valued at more than $90 billion.
Banks Rebound as Deal Eases Global Banking System Stress
Despite some Credit Suisse bondholders losing out in the deal, European bank shares climbed into positive territory, and shares in U.S. financial giants Citigroup (C.N) and JPMorgan Chase (JPM.N) rose 2.7% and 2.6%, respectively. The Credit Suisse and UBS merger significantly reduces stress in the global banking system, according to Art Hogan, a chief market strategist at B. Riley Wealth.
Current Banking Turmoil Deemed Different from the 2008 Financial Crisis
Policymakers from Washington to Europe claim that the present turmoil differs from the global financial crisis 15 years ago, as banks are better capitalized and funds more easily available.
Central Banks Coordinate to Stabilize Financial System Amidst Crisis
Top central banks, including the U.S. Federal Reserve, promised over the weekend to provide dollar liquidity to stabilize the financial system. This coordinated action involves central banks from Canada, Britain, Japan, the eurozone, and Switzerland.
Swiss Government Guarantee Backs UBS-Credit Suisse Merger
The Swiss banking merger is supported by a substantial government guarantee, which helps prevent what could have been one of the largest banking collapses since the fall of Lehman Brothers in 2008.
Concerns Remain Over Swiss Economy's Dependence on a Single Lender
The acquisition will make UBS Switzerland's only global bank, increasing the Swiss economy's reliance on a single lender. Switzerland's two largest political parties have criticized the takeover, stating that the huge state support, potentially totaling $280 billion, creates significant risks for the country.