Switzerlands biggest bank, Union Bank of Switzerland (USB) consents for the take of its troubled Swiss rival bank Credit Suisse in an emergency rescue deal to unbind the panic after two American banks failed earlier this month. In an official statement by Swiss National Bank, it says “USB today announced the takeover of Credit Suisse. This deal came after the Swiss National Bank and Finma, the countrys top regulator told that they regard the deal with UBS, the international counterparts as this was the only option to deal with the collapsing. the brokered deal aimed at containing a crisis of confidence that threatened to spread across the global financial markets. The central bank in a statement said that the rescue would secure financial stability and protect the Swiss economy. Credit Suisse has witnessed a 25 percent drop in the shares in the past one week and an emergency fund from the Swiss National Bank helped them to recover by interrupting the string of losses.The desperate takeover was done after a day of panic-stricken negotiations involving financial regulators in Switzerland, the United States, the United Kingdom, and Credit Suisse rank among the 30 most important banks in the global financial systems, and the assets together they make are over USD 1.7 trillion.According to people with knowledge of the situation, the Swiss bank is paying more than USD 2 billion for its competitor. It will only involve shares and be priced at a small portion of Credit Suisses Friday closing price, which put the banks value at around 7.4 billion Swiss francs (USD 8 billion). The deal hasnt yet been made public, so the people asked to remain anonymous. According to the media reports, the Swiss National Bank has agreed to provide USD 100 billion in liquidity as a part of the deal. However, both banks denied commenting on this. UBS was being urged by the authorities to get a deal over the line before the stock exchange reopens on Monday, to reassure investors and avoid the wave of contagious panic in the global market. However, authorities sought the agreement before the markets reopened in Asia. The strategy, which was hastily drafted over the weekend during crisis meetings, aims to address a significant decline in Credit Suisses stock and bonds over the previous week as a result of the failure of smaller American institutions. A market drama that threatened to drive away customers or counterparties failed to be resolved by the Swiss central banks liquidity backstop mid-week, with significant consequences for the larger industry.According to the reports, both lenders have operations in the United States and are regarded as systemically significant in Switzerland, US officials have been collaborating with their Swiss colleagues. The deal is welcomed in Washington, Brussels, and London as one that would support financial stability. Risk of Huge Collateral DamageAccording to the Finance Minister of Switzerland, the failure of Credit Suisse may have resulted in irreparable economic turbulence, massive collateral damage, and risk of contagion for other banks also, including UBS. The takeover has built a stronger stability framework both in Switzerland and abroad. The deal is also welcomed by the chief of the European Central Bank, Christine Lagarde, who called it swift action. The judgments made in Bern “are essential for establishing stable financial conditions and bringing back orderly market conditions. The banking industry in the eurozone is robust, with good capital and liquidity balances “she declared. The deal will “help financial stability,” according to Britain as well. Keller-Sutter claimed her US and British colleagues were “truly concerned that there could be a bankruptcy of Credit Suisse, with all the losses”.
