As UBS, Switzerland’s largest bank, has decided to acquire Credit Suisse (CS), which has been embroiled in rumors of a liquidity crisis, a crisis that had been feared to cause a major shock to the global financial market has been sealed. Thanks to the opening of the Asian stock market on Monday (20th), the expected “Black Monday” situation was avoided.Amid the sense of crisis that the confusion will be out of control if the CS crisis is not resolved early, UBS, which has CS in its arms, has quickly emerged as a competitor of Goldman Sachs Group in terms of asset size.
The Swiss government and the Swiss National Bank (SNB) said in a press conference that UBS decided to acquire CS with the support of the Swiss federal government, the Financial Supervisory Service (FINMA), and the Swiss National Bank (SNB). They said, “UBS acquired CS, enabling financial stability and protecting the Swiss economy.”
UBS’s quick acquisition decision is considered the “best result” that can prevent confusion in Switzerland and the global financial system due to the CS crisis and maintain financial stability. This is because it was urgent to extinguish the situation early as it is feared that the collapse of CS would have a huge impact on the global economy, which would be incomparable to the bankruptcy of small and medium-sized banks such as the Silicon Valley Bank (SVB).UBS Chairman Colm Kellerher explained, “This acquisition is an essential step to maintain Swiss finance and global finance,” and said, “This was the only possible solution.”CS, which has been suffering from investor and customer leaks for years, faced a crisis again as the recent U.S. SVB bankruptcy led to worsening trust in the global financial market after recording its worst loss since the financial crisis last year. Stock prices have plunged 25% over the past week, and customer flight has also accelerated, with depositors withdrawing more than $10 billion a day.Sensing the crisis, SNB hurriedly injected $54 billion in liquidity to calm the situation, but it was not enough to solve the crisis.
Swiss authorities hurriedly intervened to prevent the financial crisis from CS. The Swiss government and financial authorities convened a crisis management meeting over the weekend and rushed to come up with countermeasures to seal the CS crisis 20 days before the stock market opened.The Swiss government is known to have mediated the acquisition negotiations between UBS and CS, which consistently negotiated a $1 billion acquisition from the beginning of the negotiations, and even considered partial or complete nationalization of CS if the negotiations fail. “The government has built a bridge to the ‘mad negotiations,’” CNN said. On the same day, SNB also promised up to $100 billion in liquidity support for the acquisition.Governments also actively cooperated in the acquisition process. While financial authorities such as the U.S. and the U.K. are known to have been involved in the negotiations, Bloomberg reported that Morgan Stanley and JPMorgan Chase also advised UBS to take over.Financial authorities around the world welcomed the news of UBS’s acquisition of CS. “We welcome the Swiss authorities’ announcement to support financial stability,” the U.S. Treasury Department and the Federal Reserve said in a joint statement. “We are in close contact with them to support the implementation of the international counterpart.”Europe also welcomed the settlement of the acquisition.
European Central Bank (ECB) President Christine Lagarde assessed that the banking sector remains resilient, but said the ECB is ready to help banks hold enough cash for operations if necessary.The British Central Bank also said, “We welcome the comprehensive measures put forward by Swiss authorities to support financial stability,” and the British Financial Authority (FCA) said it will continue to cooperate with Swiss authorities to manage financial stability.
With the acquisition of CS, UBS has become a global investment bank on par with Goldman Sachs, the world’s top investment bank. Based in Basel and Zurich, Switzerland, UBS is Switzerland’s No. 1 bank by market capitalization with 74,000 employees. Its total assets exceed $1.1 trillion.
KS CHOI
US ASIA JOURNAL
