Credit Suisse, UBS and their chief regulator are working on a deal to merge Switzerland’s two biggest banks. reported the Financial Times Saturday.
The Swiss National Bank and regulator FINMA have told international counterparts they see a deal with UBS as the only option to prevent a collapse in confidence in Credit Suisse CSGN.
cs,
According to the report, deposit withdrawals from the bank topped Sfr10bn ($10.8bn) in a single day late last week, as fears for its health mounted.
The boards of both the banks are meeting later this week. Credit Suisse’s key regulators in the US, UK and Switzerland are considering the legal structure of a deal and a number of concessions that UBS UBSG,
ubs,
has sought.
UBS wants to allow the world’s biggest banks to phase out any demands that fall under global rules on capital. Additionally, UBS has requested some sort of compensation or government settlement to cover future legal costs, one of the people said.
UBS, Credit Suisse, the SNB and the Federal Reserve declined to comment. FINMA and the Bank of England did not immediately respond to requests for comment.
The prospect of a deal comes days after the Swiss central bank was forced to provide an emergency SFr50bn ($54bn) credit line to Credit Suisse.
LookCredit Suisse shares jump as Swiss banking giant says it will borrow from SNB and buy back debt
It failed to stem the slide in its share price, which has plunged to a record low after its biggest investor refused to provide more capital and its chairman admitted the exodus of wealth management clients was continuing. .
The potential acquisition marks a sharp divergence in the fortunes of the two banks.
Over the past three years, shares of UBS have gained nearly 120 percent, while those of its smaller rival have declined nearly 70 percent. UBS has a market capitalization of $56.6bn, while Credit Suisse closed trading on Friday with a value of $8bn. In 2022, UBS projects a profit of $7.6bn, while Credit Suisse makes a loss of $7.9bn, effectively wiping out the entire previous decade’s earnings.
Earlier Bloomberg News reported that Deutsche Bank AG DBK,
was monitoring the situation at Credit Suisse for possible openings for the acquisition of certain businesses.
American investment giant BlackRock BLK,
prepared a competing approach, evaluated several options and talked to other potential investors, The Financial Times also reported, However, BlackRock denied it was working on a potential rival bid for Credit Suisse Group AG. According to Bloomberg NewS.
The full merger between UBS and Credit Suisse will create one of the largest global financial institutions systemically based in Europe. UBS has total assets on its balance sheet of $1.1 trillion and Credit Suisse has $575 billion.