Under pressure from the authorities, Switzerland’s biggest bank will have to complete the takeover of rival Credit Suisse on Sunday, hoping to avoid disaster and the contagion of Monday’s market panic.

The Blick newspaper reported on Saturday that UBS will acquire Credit Suisse and that the deal will be finalized during an emergency meeting of the government and leaders of the two giant banks in Bern on Sunday.

The merger of the two largest banks in the country usually takes months, especially when one of them faces a difficult crisis and generates distrust among investors. But UBS is expected to close the deal in a few days.

pressure

According to Blake, the Swiss authorities have no option but to force UBS across their borders, due to the enormous pressure exerted by Switzerland’s main economic and financial partners.

In this context, the French Minister of Finance, Bruno Le Maire, sent a clear message through the newspaper Le Parisien that “we are now waiting for a definitive and structural solution to the problems of this bank”.

The same goes for the US Treasury, which indicated it was following the case closely.

The Swiss stock exchange opens at 8 am on Monday and until then a solution must be found for the bank, which is seen as a weak link in the sector.

When the stock market closed at a record low on Wednesday, Credit Suisse was worth just under 7 billion Swiss francs, representing the insolvency of the bank, which is one of 30 institutions like UBS worldwide deemed too big to handle. to break. failure.

But, according to the Financial Times and Blake, the bank’s clients withdrew CHF 10 billion in deposits in a single day at the end of last week, a clear sign of distrust in the institution.

general guarantees

According to Bloomberg, UPS is seeking blanket guarantees to cover legal costs and potential damages that could run into the billions of francs.

The agency indicates that discussions about an investment bank are coming to an end and one of the scenarios being explored is the purchase of Assets and Property Management and the liquidation of the bank’s investment division.

Likewise, discussions focused on the fate of the Swiss arm of Credit Suisse, one of the most profitable companies in the group, which lost 7.3 billion Swiss francs last year and expects to record a “significant” loss in 2023.

The branch provides banking services to individuals and small and medium-sized companies. Analysts point to an initial public offering that would avoid mass layoffs in Switzerland.

On Wednesday, distrust among investors and partners led the Swiss central bank to issue a CHF50 billion loan to revive Credit Suisse and calm markets. However, the period of stability did not last long.

Two years of scandals

Credit Suisse has endured two years of a series of scandals that exposed “fundamental weaknesses … in internal controls”, according to management.

In turn, the market regulator (FIN) accused him of “serious breach of his prudential obligations” by declaring Grizzle bankrupt, signaling the beginning of his bankruptcy.

Meanwhile, UBS, which had spent several years reeling from the shock of the 2008 financial crisis and a massive government bailout, was beginning to reap the rewards of its efforts. According to various media outlets, the bank had no intention of embarking on the adventure of acquiring Credit Suisse until the weekend.

faster and stronger

In October, Credit Suisse unveiled a sweeping restructuring plan that calls for cutting 9,000 jobs by 2025, more than 17% of its workforce.

The bank, which employed 52,000 people at the end of October, plans to separate investment banking from the rest of its business to focus on more stable services, including wealth management.

But, as Blake says, “Everything points to a Swiss solution this week. And when the stock market opens on Monday, Credit Suisse could be history.”