Swiss banking giant UBS has announced a deal to purchase the country’s second-largest bank, Credit Suisse, for 3 billion Swiss francs ($3.25bn) in UBS shares. The acquisition was made to prevent further turmoil within global banking following the collapse of Silicon Valley Bank, which is expected to spark further banking crises. In response to the acquisition, the Swiss central bank adjusted laws to allow for the provision of more liquidity and the government agreed to provide extra guarantees to ensure the deal went through. The acquisition of Credit Suisse by UBS will protect the stability of the Swiss economy, and the banks can obtain a liquidity assistance loan of up to 100 billion francs.
Both the European Central Bank and the US Federal Reserve welcomed the expeditious rescue of Credit Suisse, praising Swiss authorities for their swift action towards restoring orderly market conditions and financial stability. The takeover of Credit Suisse by UBS comes following a series of scandals and events that have undermined investor and client confidence. Credit Suisse has found itself at the heart of the banking storm as the collapse of Silicon Valley Bank saw fears of a banking crisis arise.
The acquisition of Credit Suisse is a sign of further consolidation in the banking industry due to the effects of covid-19. As a result of the pandemic, low economic growth and low-interest rates have made it harder for banks and investors to receive returns. The deal will come as a relief to global financial markets since the pandemic has led to a significant decrease in the amount of mergers and acquisitions, making the future uncertain. The acquisition of Credit Suisse can bring some stability to the global banking industry with the supply of UBS shares increasing, leading to a recovery of the Swiss banking system in the long run. Global banking turmoil will only increase due to the pandemic, and acquisitions such as this are one method to stabilise banking and the global economy.