If a deal is not struck, Monday markets would be rocked by a global banking crisis.
FT:Switzerland prepares emergency measures to deliver UBS takeover of Credit Suisse
Bloomberg: Credit Suisse Investment Bank Said a Key Sticking Point in Talks
-
UBS is said to be worried about risks, regulatory scrutiny
-
Excluding investment bank would also curb UBS’s growth in deal
via Zerohedge:
So much can change in just 48 hours.
Late on Thursday, just hours after the SNB had launched the first (of many) bailout attempts of Swiss banking giant Credit Suisse, Bloomberg blasted the following headline:
- *UBS, CREDIT SUISSE SAID TO OPPOSE IDEA OF A FORCED COMBINATION
This lack of enthusiasm by UBS to acquire its struggling rival of course forced the Swiss National Bank to front CS a CHF50 billion credit line to hold it over for the next four days amid a furious bank run, one which we said would be woefully insufficient to restore confidence in the collapsing lender, and which we probably used up in just a few hours.
Then, late on Friday, both banks “unexpectedly” changed their minds and we got the following 180 degree U-Turn report from the FT:
- *UBS IN TALKS TO ACQUIRE ALL OR PART OF CREDIT SUISSE: FT
So a deal is inevitable after all… but as always, there is a footnote one which we predicted yesterday when we said that a deal would only happen if the acquiring bank – in this case UBS – got a full central bank backstop.
bank megamerger weekend, with lots of central bank backstops t.co/pobOLTtFJM
— zerohedge (@zerohedge) March 17, 2023
That now appears to be the case with Bloomberg, Reuters and the WSJ all reporting that UBS is asking the Swiss government for a backstop to cover future risks if it were to buy Credit Suisse Group AG, after the Swiss National Bank and regulator Finma have told international counterparts that they regard a deal with UBS as the only option to arrest a collapse in confidence in Credit Suisse. The FT reported that deposit outflows from the bank topped CHF10bn ($10.8bn) a day late last week as fears for its health mounted.
According to the reports, UBS is discussing scenarios in which the government would take on certain legal costs and potential losses in any deal. Credit Suisse set aside SFr1.2bn in legal provisions in 2022 and warned that as yet unresolved lawsuits and regulatory probes could add another SFr1.2bn.
h/t Massimo