UBS seeks to acquire Credit Suisse for up to $1 billion: Report

According to the Financial Times on Sunday, UBS Group AG has made a bid to acquire Credit Suisse for up to $1 billion, and the Swiss government intends to amend national legislation to prevent a shareholder vote on the deal.

The Swiss government did not immediately react to a request for comment, while Credit Suisse and UBS both refused to comment.

Before the financial markets reopen on Monday, authorities are working feverishly to save the 167-year-old bank, one of the biggest asset managers in the world. The collapse of Credit Suisse, one of the 30 banks with significant global systemic importance, would have an impact on the whole financial system.

The Financial Times claimed that the all-share agreement was scheduled to be signed as soon as Sunday.

According to people familiar with the situation who were quoted in the article, an offer was made on Sunday morning for 0.25 Swiss francs ($0.27) per Credit Suisse share, which was significantly less than the bank's closing price on Friday of 1.86 Swiss francs and virtually eliminated existing shareholders.

The article also said that UBS insisted on a "significant adverse change" clause that would invalidate the agreement should its credit default spreads increase by 100 basis points or higher. It did point out that things were moving quickly and there was no assurance that the conditions would stay the same or that an agreement would be achieved.

Earlier, a source familiar with the discussions told Reuters that UBS was looking about $6 billion from the Swiss government as part of a potential acquisition of its competitor.

According to two sources who spoke to Reuters, the assurances UBS is seeking would pay for the costs of dismantling a portion of Credit Suisse as well as prospective legal fees.

One insider had issued a warning that the negotiations were running into severe roadblocks and that if the two banks merged, 10,000 jobs could need to be eliminated. On Sunday, the Swiss Bank Workers Association demanded that a task group be immediately formed to address the threat to employment.

After a terrible week for banking equities and attempts in Europe and the US to support the industry after the failure of US lenders Silicon Valley Bank and Signature Bank, discussions for the future of Credit Suisse reached a fever pitch over the weekend.

Although Credit Suisse received billions in loans from the Swiss central bank to stabilise its precarious balance sheet, the administration of U.S. President Joe Biden rushed to safeguard customer savings.

According to two persons with knowledge of the situation, UBS was under pressure from the Swiss government to acquire its local competitor in order to quell the problem.

Although Bloomberg claimed that the buyout discussions were casting into question plans to spin off its investment bank under the First Boston name, the idea may see Credit Suisse's Switzerland division sold off.

According to Bloomberg, U.S. authorities are collaborating with their Swiss counterparts to help broker a deal, and according to Sky News, the Bank of England has told UBS and other foreign counterparts that it would support the proposed acquisition of Credit Suisse, which sees the United Kingdom as a key market.

Forceful Reaction

The value of Credit Suisse shares fell by 25% during the last week. As it struggles to recover from a spate of scandals that have eroded the trust of investors and customers, the bank was forced to rely on $54 billion in central bank support.

On its front page, the Swiss tabloid NZZ am Sonntag announced, "The dying days of Credit Suisse," over an image of the bank's headquarters in flames.

The fall of California's Silicon Valley Bank put into sharp relief how the banking industry was being pressured by the U.S. Federal Reserve and other central banks, including the European Central Bank on Thursday.

The failures of SVB and Signature are the two biggest bank failures in American history, after Washington Mutual's bankruptcy in the 2008 global financial crisis. According to the Wall Street Journal, U.S. Senator Elizabeth Warren, who supports stricter banking regulations, has demanded a probe into the two failures.

The S&P Banks index saw its worst two-week loss since the pandemic rattled markets in March 2020, a 22% drop, as banking stocks have been hammered internationally.

In recent days, US banks have requested a record $153 billion in emergency liquidity from the Federal Reserve, while large lenders have given smaller institution First Republic a $30 billion lifeline.

According to Bloomberg, the Mid-Size Bank Coalition of America urged authorities to extend federal protection to all deposits for the next two years while First Citizens BancShares and at least one other bidder evaluate an offer for SVB.

With Biden urging Congress to grant regulators more authority over the industry, the emphasis in Washington has shifted to more monitoring to make sure that banks and their executives are held responsible.

Rapid and dramatic occurrences might lead to major banks growing, smaller banks struggling to keep up, and more regional lenders going out of business.

In three to six months, all of these institutions will appear radically different, according to Keith Noreika, vice president of Patomak Global Partners and a former Republican comptroller of the currency of the United States. "People are genuinely transferring their money around," Noreika said.