Swiss holds press conference amid Credit Suisse woes

Leading Swiss hold a news conference on Sunday night after multiple media reports reported that banking giant UBS is said to be in talks to acquire its smaller rival Credit Suisse to avoid further market-shattering global banking turmoil.

The Bundesrat, the seven-member governing body that includes Swiss President Alain Berset, is expected to announce that UBS will acquire Credit Suisse in a potential deal brokered by the Swiss government.

Credit Suisse is listed as one of the world’s global systemically important banks by the Financial Stability Board, an international body that oversees the global financial system. That means regulators believe its runaway failure would cause ripples across the financial system, much like the collapse of Lehman Brothers 15 years ago.

Sunday’s press conference follows the collapse of two major US banks last week that spurred me on a frantic, broad answer of the U.S. government to prevent further bank panics. Still, global financial markets have been on edge since Credit Suisse stock prices began falling this week.

The 167-year-old Credit Suisse does received $50 billion (54 million Swiss francs) in loans from the Swiss National Bank, prompting a brief rally in the bank’s share price. But the move didn’t seem enough to stem an outflow of deposits, according to news reports.

Nevertheless, many from Credit Suisse Problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to it a major rescue effort by the Swiss Federal Deposit Insurance Fund and the federal reserve. As a result, their demise doesn’t necessarily signal the start of a financial crisis, much like it did in 2008.

The deal caps a highly volatile week for Credit Suisse, especially on Wednesday as its shares fell to a record low after its biggest investor, the National Bank of Saudi Arabia, said it would stop investing money in the bank to avoid violating regulations that would come into effect if its stake rose by about 10% would.

Shares fell 8% on Friday to close at 1.86 francs ($2) on the Swiss stock exchange. The share has come a long way: in 2007 it was listed at over 80 francs.

The current troubles began after Credit Suisse reported on Tuesday that managers identified “material weaknesses” in the bank’s internal controls over financial reporting late last year. That fueled fears that Credit Suisse could be the next domino to fall.

Smaller than its Swiss rival UBS, Credit Suisse still wields significant influence with $1.4 trillion in assets under management. The firm has major trading offices around the world, serves the rich and affluent through its wealth management business and is a key advisor to global companies on mergers and acquisitions. Notably, Credit Suisse did not require government support during the 2008 financial crisis, while UBS did.

Despite the banking turmoil, the European Central Bank approved a large increase of half a percentage point on Thursday on interest rates to try to stem stubbornly high inflation, saying Europe’s banking sector is “resilient” and financially strong.

ECB President Christine Lagarde said banks were “in a completely different position to 2008” during the financial crisis, partly because of tighter government regulation.

The Swiss bank has been pushing to raise money from investors and launch a new strategy to overcome a number of problems, including bad bets on hedge fundsrepeated Restructuring of top management and a involved in the espionage scandal UBS.

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