© Reuters. FILE PHOTO: Logo is pictured on Credit Suisse bank in Geneva, Switzerland, March 15, 2023. REUTERS/Denis Balibouse/File Photo
By Stefania Spezzati, Oliver Hirt and John O’Donnell
(Reuters) – Authorities scrambled to bail out Credit Suisse on Sunday before financial markets reopened as UBS AG sought $6 billion from the Swiss government as part of a possible purchase his opponents, said a person familiar with the negotiations.
A crisis of confidence has rocked 167-year-old Credit Suisse, one of the world’s largest asset managers, following the collapse of US lenders Silicon Valley Bank and Silicon Valley Bank. signature bank (NASDAQ:).
As one of the 30 globally systemically important banks, the failure of Credit Suisse would spread throughout the entire financial system.
“The Last Days of Credit Suisse,” the front page of the Swiss newspaper NZZ am Sonntag featured an illustration of the bank’s headquarters in flames.
While regulators want a resolution before markets reopen on Monday, one source warned that negotiations are facing significant obstacles and 10,000 jobs may have to be cut. cut if the two banks combine.
Two people told Reuters that the guarantees UBS was seeking would cover the cost of dissolving Credit Suisse’s divisions and potential litigation fees.
Credit Suisse, UBS and the Swiss government declined to comment.
The frenetic talks over the weekend come after a brutal week for bank stocks and efforts in Europe and the US to shore up the sector. The administration of US President Joe Biden has moved to support consumer deposits while the Swiss central bank lends billions of dollars to Credit Suisse to stabilize its wobbly balance sheet.
UBS has been under pressure from Swiss authorities to take over its local rival to control the crisis, two people with knowledge of the matter said.
The plan could disrupt Credit Suisse’s Swiss business, while Bloomberg reports that takeover talks are casting doubt on plans to phase out the investment banking under the brand name. First Boston.
The Financial Times reports that Switzerland is preparing to use emergency measures to speed up the deal.
US authorities are working with their Swiss counterparts to help broker a deal, Bloomberg reported, while Sky News said the Bank of England had indicated to its international partners and UBS said it would support the proposed takeover of Credit Suisse, which sees the UK as a key focus. market.
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STRONG RESPONSE
Credit Suisse shares have lost a quarter of their value in the last week. The bank has been forced to tap $54 billion in central bank funding as it tries to recover from a series of scandals that have eroded investor and customer confidence.
There have been many reports of interest in Credit Suisse, including Deutsche Bank (ETR:) consider buying some of its assets.
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The failure of the California-based Silicon Valley Bank has highlighted the relentless campaign of rate hikes by the US Federal Reserve and other central banks – including the European Central Bank. on Thursday – has put pressure on the banking industry.
Efforts by some US regional banks to raise capital and assuage concerns about their health are running counter to concerns about impending asset losses, sources told Reuters.
For the sake of financial stability, financial industry executives have called on the Federal Reserve to pause its tightening of monetary policy.
The collapse of SVB and Signature was the largest bank failure in US history behind the collapse of Washington Mutual during the 2008 global financial crisis. US Senator Elizabeth Warren, who is pushing pushing for tighter regulations on banking, has called for investigations into two incidents, the Wall Street Journal reported.
Bank stocks globally were battered with the S&P Banks index falling 22%, marking its biggest two-week drop since the pandemic rocked markets in March 2020.
US banks have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days, and major lenders have thrown a $30 billion relief to small lenders. than First Republic.
First Citizens BancShares is evaluating an offer to buy SVB along with at least one other pursuer, while the Alliance of Midsize Banks of America asks regulators to extend federal insurance to all funds. sent over the next two years, Bloomberg reported.
In Washington, focus has shifted to closer oversight to ensure that banks and their executives are held accountable to Biden’s call for Congress to give regulators greater power over with this field.
Rapid and dramatic events could mean big banks getting bigger, smaller banks could struggle to keep up, and many regional lenders could close.
“People are really moving their money around, all the banks,” said Keith Noreika, vice president of Patomak Global Partners (NYSE: NYSE) and former Republican US currency controller. This product is going to look fundamentally different in the next three, six months.”
