After detailed discussions over the weekend, Swiss banking giant UBS agreed to buy crisis-hit Credit Suisse for nearly $3.2 billion. The deal was done in an effort to avoid further market turmoil in the global banking sector.
Credit Suisse's plan to borrow up to $54 billion failed to reassure investors and the bank's customers that led to the authorities push UBS to buy the bank.
Shares of Credit Suisse and other banks plunged this week after the failure of two banks in the US sparked concerns about other potentially shaky institutions in the global financial system, reported Associated Press (AP).
The deal was one of great breadth for the stability of international finance," said Swiss President Alain Berset as he announced it Sunday night. "An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system,” he said.
An emergency ordinance allowing the merger without shareholder approval was passed by the Switzerland's executive branch.
Meanwhile, Credit Suisse Chairman Axel Lehmann called the sale a clear turning point.
It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets, Lehmann said, adding that the focus is now on the future and in particular on the 50,000 Credit Suisse employees, 17,000 of whom are in Switzerland, reported AP.
Colm Kelleher, the UBS chairman, hailed the enormous opportunities that emerge from the takeover, and highlighted his bank's conservative risk culture a subtle swipe at Credit Suisse's reputation for more swashbuckling, aggressive gambles in search of bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets, reported AP.
Swiss Finance Minister Karin Keller-Sutter said the council "regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.
UBS officials said that they plan to sell off parts of Credit Suisse or reduce the bank's size in the coming months and years.
The Swiss government is providing more than 100 billion francs in aid and financial backstops to make the deal go through.
As part of the deal, approximately 16 billion francs (USD 17.3 billion) in Credit Suisse bonds will be wiped out, reported AP.
Also, New York Community Bank has agreed to buy failed Signature Bank in a USD 2.7 billion deal, the Federal Deposit Insurance Corp informed.
The 40 branches of Signature Bank will become Flagstar Bank from Monday onwards. Flagstar is one of New York Community Bank's subsidiaries.
The deal will include the purchase of USD 38.4 billion in Signature Bank's assets.
In the recent banking crisis, Signature Bank was the second bank to fail after the collapse of New York based Silicon Valley Bank.