British banking regulators have approved the takeover of Credit Suisse by UBS, its Swiss counterpart, as global financial regulators work to contain the largest crisis in the industry since 2008.
Credit Suisse has been brought to the brink of financial collapse despite securing a $54bn credit line from Switzerland’s central bank.
The move failed to prevent a rush of customer withdrawals, prompting the Swiss government to request that UBS explore a takeover.
The Bank of England has indicated its support for the emergency transaction to international counterparts and to UBS.
Although Credit Suisse has a market capitalisation of just $8bn, fears for its future have sent shockwaves through financial markets across the world.
Its investment bank balance sheet has proved to be a stumbling block in talks with UBS.
The structure of a deal remains unclear. UBS’s board has been reluctant to explore a deal with its fellow Swiss bank, which has been forced into a series of capital raisings following huge fines and restructuring charges.
Authorities in the US have reportedly pressed the Swiss government to expedite a solution to the crisis.
Reports suggest that UBS wants the Swiss government to provide a multibillion-dollar backstop to insure it against losses arising from the takeover of its smaller rival.
The current turmoil in the global banking sector was sparked by the collapse of Silicon Valley Bank in the US earlier this month.
Although a number of other mid-sized American lenders have also been forced to seek emergency funding, there are hopes that a takeover of Credit Suisse will avert the kind of contagion that evokes comparisons with the crisis of 2008, when banks including Bear Stearns and Lehman Brothers collapsed.
Credit Suisse employs approximately 5,000 people in the UK, making it one of the largest investment banking employers in the City.
Jeremy Hunt, the chancellor, and Andrew Bailey, the Bank of England governor, are being kept informed about developments relating to the most significant global banking merger since the financial meltdown of 15 years ago.
The Bank of England declined to comment on Sunday, while Credit Suisse and UBS have been contacted for comment.