On Sunday, UBS agreed to buy its struggling rival Credit Suisse for 3 billion Swiss francs ($3.2 billion). Swiss regulators played a key part in the deal as governments looked to stem a contagion threatening the global banking system. “With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” read a statement from the Swiss National Bank, which noted the central bank worked with the Swiss government and the Swiss Financial Market Supervisory Authority to bring about the combination of the country’s two largest banks.
The deal terms will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold. “This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” said UBS Chairman Colm Kelleher in a statement. According to UBS, the combined bank will have $5 trillion of invested assets. “We are committed to making this deal a great success. There are no options in this,” Kelleher said when asked during the press conference if the bank could back out of the deal. “This is absolutely essential to the financial structure of Switzerland and … to global finance.” The Swiss National Bank pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover. The Swiss government also guaranteed to assume losses up to 9 billion Swiss francs from certain assets over a preset threshold “to reduce any risks for UBS,” said a separate government statement. “This is a commercial solution and not a bailout,” said Karin Keller-Sutter, the Swiss finance minister, in a press conference Sunday.