Credit Suisse

UBS has agreed a deal to take over Credit Suisse, paying 3.23 billion Swiss francs ($3.23 billion) in stock and to assuming up to 5 billion Swiss francs ($5.4 billion) in losses, in a merger orchestrated by Swiss authorities to prevent further market-shaking instability in global banking.

The Swiss central bank will provide 100 billion Swiss francs ($108 billion) in liquidity assistance to UBS and Credit Suisse.

The federal government would provide a loss guarantee of up to 9 billion Swiss francs for a clearly defined portion of Credit Suisse’s portfolio to enable UBS to acquire Credit Suisse, the government said.

Even though Credit Suisse remained solvent, Switzerland’s financial regulator FINMA said there was a possibility that it may have become “illiquid, even if it remained solvent, and it was necessary for the authorities to take action”.

Credit Suisse Additional Tier 1 shares with a nominal value of about 16 billion Swiss francs ($17.2 billion) will be totally written off after the Swiss government supported UBS’ acquisition of Credit Suisse, according to FINMA.

The statement was made during a “make-or-break” weekend, when competitors grew wary of doing business with the faltering Swiss bank and its authorities pressured it to negotiate a deal with UBS.

UBS and Credit Suisse are both among the 30 worldwide systemically significant banks constantly monitored by regulators, and the failure of Credit Suisse would have repercussions throughout the whole financial system.

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