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 news conference follows last week’s collapse of two major US banks, which prompted a frantic, broad-based response from the US government to prevent further bank panics. Still, global financial markets have been on edge since Credit Suisse stock prices began falling this week.
Credit Suisse, 167, had already secured a $50 billion loan 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.
Still, many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures prompted major bailouts from the Federal Deposit Insurance Corporation 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 press conference will cap a highly volatile week for Credit Suisse, particularly on Wednesday, when its shares fell to record lows after its biggest investor, the Saudi National Bank, said it would stop investing money in the bank to avoid a stumble avoid regulations that would come into force if the proportion increased by around 10%.
Shares fell 8% on Friday to close at $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.
As part of the reforms following the 2008 financial crisis, Credit Suisse is also among the 30 financial institutions known as global systemically important banks, which have tightened scrutiny and higher capital requirements.
If based in the US, Credit Suisse would be the country’s fifth-largest bank, behind the “too big to fail” firms of Wells Fargo, Bank of America, JPMorgan Chase and Citigroup.
Despite the banking turmoil, the European Central Bank on Thursday approved a big half-a-point rate hike to try to stem stubbornly high inflation, saying Europe’s banking sector was “resilient” and had strong finances.
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 series of problems including bad bets on hedge funds, repeated top management reshuffles and a spy scandal involving UBS.
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