Swiss Finance Minister Warns of Bankruptcy Consequences
The Swiss finance minister emphasized the potential damage that the bankruptcy of a globally significant bank could cause, with irreparable consequences for financial markets. It remains to be seen if the deal will be sufficient to restore trust in lenders worldwide. The first indication is expected when stock markets open in Asia, Australia, and New Zealand.
Swiss Central Bank Offers Substantial Liquidity
The Swiss central bank has pledged to provide significant liquidity to the merged bank. The deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse. The central bank believes the takeover will secure financial stability and protect the Swiss economy during this exceptional situation.
Deal Value and Business Continuity
While the exact deal value has not yet been disclosed, a Financial Times report estimated it at over $2 billion. The Swiss Financial Market Supervisory Authority (FINMA) confirmed that both banks could continue all business activities without restrictions or interruptions. FINMA plans to coordinate with national and international authorities, including the U.S. Federal Reserve and the British Prudential Regulation Authority.
Global Banks Brace for Possible Contagion
The acquisition follows a tumultuous week for Credit Suisse, during which it lost a quarter of its value and required $54 billion in central bank funding to stabilize its balance sheet. As one of 30 systemically important global banks, the deal's ramifications could impact worldwide financial markets. Major European banks are now examining potential contagion scenarios and looking to the Federal Reserve and European Central Bank for stronger support signals.
Swiss Authorities Examine Bondholder Losses
Swiss authorities are considering imposing losses on Credit Suisse bondholders as part of the bank's rescue. However, European regulators are concerned that such a move could harm investor confidence in Europe's financial sector. U.S. authorities are reportedly working with their Swiss counterparts to facilitate the deal. The Bank of England has supported the proposed takeover of Credit Suisse, a key player in the British market.