Credit Suisse rescued by UBS as concern for banking sector grows

The Swiss authorities brokered a takeover of Credit Suisse by UBS yesterday, just days after the nation’s central bank extended a £44 billion lifeline to the 167-year-old financial institution.

UBS bought its compatriot bank for £2.6 billion in stock, while also agreeing to take on £4.4 billion in losses and liabilities. £88.5 billion in liquidity assistance will be made available to both banks.

The deal – which was purposely agreed before the opening of markets on Monday – was designed to ease investors’ concerns about the viability of Credit Suisse specifically and the European banking sector more generally. However, financial stocks were down across the board in early trading as doubts persisted.

The chairman of Credit Suisse, Axel Lehmann, said: “Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome.

“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”

The Swiss central bank added that it was confident the agreement would “secure financial stability and protect the Swiss economy in this exceptional situation”.

In an indication of its importance, a series of central bankers and politicians from across the globe issued statements on the merger.

The Bank of England commented: “We welcome the comprehensive set of actions set out by the Swiss authorities today in order to support financial stability...The UK banking system is well capitalised and funded and remains safe and sound.”

A spokesperson for German chancellor Olaf Scholz, meanwhile, was moved to declare: “Chancellor Scholz welcomes the resolve of the Swiss authorities. The situation is not comparable to 2008/2009. The German banking system is well positioned.”

The merger may lead to job losses at the UK arm of Credit Suisse, which employs 5,000 in the City of London.

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