UBS’s takeover of Credit Suisse protected depositors, took huge losses for shareholders and wiped out bondholders

Zurich, Switzerland – Depositors fully protected, shareholder stakes smaller, bondholders all but wiped out by US bail-in credit suisse It is owned by UBS, Switzerland’s largest bank.

Credit Suisse was founded 167 years ago in 1856 by businessman Alfred Escher.

UBS announced on Sunday that it would buy Credit Suisse for a fraction of its value at the request of the Swiss Federal Government, the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank.

Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares. The deal was valued at just 3 billion Swiss francs ($3.24 million), about one-third of the bank’s capital at the close of trading on Friday.

Credit Suisse shares closed at $2.01 on Friday after falling 6.94% on the day. By Sunday, those shares were worth 0.76 cents.

In an unusual move, the Swiss government has announced legislation to allow deals to proceed without shareholder approval.

“With UBS’s acquisition of Credit Suisse, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation,” said the Swiss National Bank. statement Released late Sunday.

Both banks will have unrestricted access to the existing facilities of the Swiss Central Bank and access to liquidity through the Guidelines for Monetary Policy Instruments.

“In addition, under the Federal Council’s emergency ordinance, Credit Suisse and UBS will acquire liquidity assistance loans with special bankruptcy creditor status totaling up to CHF 100 billion ($108 billion). We can,” said a statement from the Swiss National Bank. Said.

The (up to) CHF 100 billion loan ($108 billion) will be backed by a federal default guarantee.

“By providing sufficient liquidity, both banks will be able to access the liquidity they need.By providing substantial liquidity support, the SNB will fulfill its mission to contribute to the stability of the financial system. And we continue to work closely with the federal government, and FINMA is to this end,” said the Swiss Central Bank statement.

moreover statement FINMA by the Swiss Financial Market Supervisory Authority said the authorities had approved the takeover.

“FINMA welcomes the acquisition solutions and measures taken by the Swiss Confederation and the Swiss National Bank SNB. The transaction and the measures taken will ensure the stability of the bank’s customers and the financial center. We provide liquidity support, backed by a default guarantee from the Swiss Confederation, which will provide sufficient liquidity to complete the acquisition.

“Credit Suisse Group is facing a crisis of confidence, manifested in a significant outflow of client funds. There was a risk of loss of viability. Solvency remained and the authorities needed to act to prevent serious damage to Switzerland and international financial markets,” the statement said.

FINMA said it has been closely monitoring Credit Suisse for months. During this time, the bank admitted that it had taken a number of steps to stabilize the situation. “However, these were not enough to restore confidence in banks, and broader options were also explored. UBS’s proposal to acquire Credit Suisse to protect depositors and financial markets was It has proven to be the most effective solution.Therefore, FINMA has approved the transaction,” said a statement on Sunday.

While the acquisition was initially welcomed by some bondholders, the fine print revealed that AT1 bondholders would be wiped out. “In close collaboration with FINMA, the Swiss Confederation and the SNB, UBS will acquire Credit Suisse outright. dollar), increasing core capital,” FINMA said in a statement.

Acquisitions make banks bigger and current regulations require higher capital buffers. FINMA said it would give an “appropriate transition period” to build these out.

For Credit Suisse’s customers, especially their depositors, the acquisition is a relief.

A FINMA statement issued on Sunday said “all banking services will continue to be available without interruption.”

“Based on this, it will be possible to continue all business activities of the bank without restrictions or interruptions. ) will be guaranteed protection for depositors as a card) will be accessible as usual as well,” the statement added.