Switzerland’s largest bank, UBS, is reportedly approaching a deal to take over its troubled rival Credit Suisse, a move that could ease growing concerns that the turbulence at the European banking behemoth could ripple through the global economy.
The discussions are the latest development in more than a week of tumult and fears about the resilience of the global financial system after the shocking collapse of Silicon Valley Bank and subsequent actions on Wall Street and by regulators to shore up major financial institutions.
The banks’ key regulators in the United States, Britain and Switzerland also are considering the legal structure of a deal, as UBS seeks concessions, including some form of government agreement to cover future legal costs, according to the Financial Times. Credit Suisse’s shares jumped 7 percent in after-hours trading.
Credit Suisse and UBS declined to comment. The Swiss National Bank and the U.S. Federal Reserve did not immediately respond to requests for comment.
Germany’s Deutsche Bank also is watching to see if it could acquire certain Credit Suisse businesses, according to a Bloomberg News report.
A takeover could limit fears that the turmoil at Credit Suisse and multiple troubled financial institutions in the United States would create a banking contagion, similar to the events of the 2008 financial crisis. Even after actions by governments and financial institutions this week, the stock market has showed continued worry that the banking industry’s tumult has not settled. Yet experts say that the financial system appears to be on firm ground and that the volatility in the stock market may reflect news developments rather than a signal of a broader crisis.
The discussions follow a week of chaos for Credit Suisse. On Thursday, Switzerland’s central bank provided the company a $53.7 billion liquidity lifeline, after the bank disclosed “material weaknesses” in its financial reporting.
But Credit Suisse’s underlying troubles began well before the recent trouble at banks in the United States. The 167-year-old bank, which originally served the ultrawealthy, has had financial losses, risk and compliance problems and a critical data breach. Credit Suisse in October disclosed that it suffered significant customer withdrawals, and in 2021, it experienced major losses because of its exposure to the collapse of New York-based Archegos Capital Management.
The moves in Europe follow an announcement Thursday that 11 of the biggest banks in the United States would deposit $30 billion into First Republic Bank. The move was aimed at shoring up the bank and sending a signal about the broader security of the U.S. financial system. Meanwhile, Silicon Valley Bank’s parent company on Friday filed for Chapter 11 bankruptcy.