UBS has agreed to purchase Credit Suisse, a smaller rival, in an emergency purchase aimed at securing financial stability and protecting the Swiss economy amidst the fallout from the sudden collapse of Silicon Valley Bank earlier this month.
The Swiss federal government, the Swiss Financial Market Supervisory Authority FINMA, and the Swiss National Bank supported the takeover, with Swiss authorities stating that the deal laid the foundations for greater stability both in Switzerland and internationally.
The global banking system has been grappling with the effects of Silicon Valley Bank and Signature Bank’s failures, which occurred less than two weeks ago and within days of each other.
Credit Suisse received almost $54 billion from the Swiss national bank last week as part of negotiations, while a consortium of 11 massive US banks agreed to provide $30 billion in funding for First Republic Bank.
Despite the Swiss national bank’s move to shore up Credit Suisse’s finances, concerns remain about the institution’s health, as it has not been profitable in two years.
Credit Suisse’s shares dropped 30% on the SIX stock exchange after its largest shareholder said it would not inject additional funds into the institution.
The steep drop-off in its share prices one day earlier marked a record low for Credit Suisse, and its plans to borrow up to 50 billion francs from the national bank were announced on Thursday.
Despite these efforts, analysts have expressed doubts about the health of Credit Suisse, especially since it has not been profitable in two years.
UBS’s acquisition of Credit Suisse in an effort to avoid irreparable economic turmoil in Switzerland and throughout the world is seen as a crucial step towards greater stability, both domestically and internationally.