Shares of Credit Suisse plunged 60.5% in early trading Monday after the announcement that banking giant UBS would buy its troubled rival for almost $3.25 billion in a deal orchestrated by regulators to stave off further market-shaking turmoil in the...
Swiss authorities urged UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs failed to reassure investors and the bank’s customers. Shares of Credit Suisse and other banks plunged last week after the failure of two banks in the U.S. raised questions about other potentially weak global financial institutions.
Credit Suisse is among 30 financial institutions known as globally systemically important banks, and authorities were worried about the fallout if it were to fail. Many of its current problems are unique and unlike the weaknesses that brought down Silicon Valley Bank and Signature Bank in the U.S. It has faced an array of troubles in recent years, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.
As part of the deal, approximately 16 billion francs in Credit Suisse bonds will be wiped out. That has triggered concern about the market for those bonds and for other banks that hold them. Also Sunday, the world’s central banks announced coordinated moves to stabilize banks, including access to a lending facility for banks to borrow U.S. dollars if they need them, a practice widely used during the 2008 crisis.
European Central Bank President Christine Lagarde lauded the “swift action” by Swiss officials, saying they were “instrumental for restoring orderly market conditions and ensuring financial stability.”
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