Three mechanisms and officials from the European banking sector today hailed UBS’s emergency takeover of Credit Suisse, as well as Switzerland’s measures to “ensure financial stability”, noting that they show “that the European banking sector is resilient”.
“The European Central Bank (ECB) Single Supervisory Mechanism (SSM), the Single Resolution Board (SRB) and the European Banking Authority (EBA) welcome the comprehensive set of measures taken yesterday. [domingo] by the Swiss authorities to ensure financial stability,” reads a joint statement shared today.
According to the three entities, the European banking sector “is resilient, with robust levels of capital and liquidity.”
The SSM, the CUR and the EBA refer to the reforms recommended by the Financial Stability Council after the great financial crisis, namely the establishment of an order by which shareholders and creditors must assume the losses of a bank in difficulties .
Swiss President Alain Berset announced on Sunday that the
The operation will have a value of 3,000 million Swiss francs (3,020 million euros), which will be paid in UBS shares, that is, with a value of 0.76 francs per Credit Suisse share, which was worth 1.86 Swiss francs at the close of the market on Friday.
In a statement, Credit Suisse said it was informed by Swiss financial supervisor FINMA that it determined that the bank’s ‘Additional Tier 1’ capital, derived from subordinated bonds called ‘Capital Tier 1 Notes’, with an aggregate face value of approximately 16 million Swiss francs (16,180 million euros), will be reduced to zero, with losses for the holders of that debt.
The bank further explained that, taking into account the “unique circumstances affecting the Swiss economy as a whole”, the Swiss Federal Council issued an emergency ordinance (Notverordnung) tailored to this specific transaction.
“More importantly, the merger will be implemented without the necessary approval from UBS and Credit Suisse shareholders to increase the certainty of the deal,” it said, adding that the parties expect the transaction to close by the end of 2023.
The merger between these banking giants, which are part of the club of 30 banks considered too big to fail, was closed and announced before the opening of the Asian markets, trying to avoid panic.
In the case of Credit Suisse, which endured two difficult years and a few scandals, leadership efforts to come up with a three-year restructuring plan were of little avail.
The Swiss central bank promised early on Thursday to grant aid of 50,000 million Swiss francs to Credit Suisse, after a very negative Wednesday on the stock market, but the recovery achieved was brief and on Friday the bank fell again by 8% .
UBS will benefit from a CHF9 billion government guarantee that serves as insurance if problems are discovered in very specific Credit Suisse portfolios, Keller-Sutter said.
The central bank also announced a liquidity facility of up to CHF 100 billion for UBS and Credit Suisse.
Source: TSF
