After regulators approved a Credit Suisse rescue plan to calm bank anxiety, the UK’s central bank deemed banks “safe”.
After regulators worked overnight, UBS bought the bank on Sunday.
It comes amid concerns about the global financial system following the failure of two smaller US institutions in recent weeks.
Despite the actions taken by regulators on Sunday, European bank stocks declined.
Having regained some ground, Deutsche Bank and UBS were trading 1.8% and 3.7% lower, respectively.
British banks, which experienced their steepest declines in over a year last week, remained in the red.
However, experts do not anticipate a repeat of the 2008 financial crisis. In which the collapse of several large institutions triggered a global recession.
The Swiss National Bank stated that the Credit Suisse rescue deal was the best method to restore market confidence and mitigate economic risks.
Credit Suisse was valued at $3.15 billion (£2.6 billion) in the last-minute deal, down from $8 billion on Friday.
But the transaction has accomplished what regulators intended – securing a result before Monday’s opening of the financial markets.
UBS’s purchase of Credit Suisse “should” reassure investors, according to former UK CEO Mark Yallop.
“This is a takeover of a troubled institution with particular idiosyncratic problems,” he told the BBC’s Today program. “These problems are not indicative of broader issues in the banking markets.”
I believe this transaction will unquestionably stabilize [the bank] and should restore confidence to the banking market in general.
Mr. Yallop suggested that the sale of Credit Suisse should be viewed separately from the failure of two lesser banks in the United States, which he said were impacted by rising interest rates.
To sustain liquidity, six central banks, including the Bank of England, pledged to increase U.S. dollar flows.
Along with the Bank of Japan, the Bank of Canada, the European Central Bank, the Federal Reserve of the United States, and the Swiss National Bank, the Bank of England stated that the move served as an “important backstop to ease strains in global funding markets” and relieve the pressure on banks.
In a statement issued after UBS acquires Credit Suisse, the Swiss central bank stated that the transaction protected the Swiss economy “in this exceptional situation.”
The 167-year-old bank operates at a loss and has encountered numerous issues in recent years, including money laundering allegations.
Credit Suisse was given an emergency $54 billion lifeline by the Swiss National Bank on Wednesday to reassure markets. However, Credit Suisse shares fell 24%, necessitating a rescue agreement.
After Sunday night’s announcement, UBS chairman Colm Kelleher stated in the Swiss capital Bern that the takeover had been “attractive” for UBS shareholders, but characterized it as an “emergency rescue.”
Mr. Kelleher stated that UBS would dismantle the investment banking division of Credit Suisse.
The chairman of UBS stated that it was “too early” to predict the future of employment. Credit Suisse employs approximately 74,000 people, including approximately 5,000 in the United Kingdom.
“Once we’ve sat down and analyzed what we need to do, we must act rationally and thoughtfully,” he explained.
Other international financial institutions lauded the transaction.
The Bank of England expressed its approval of the Swiss authorities’ “comprehensive set of actions.”
Throughout the preparations for today’s announcements, we have worked closely with international counterparts and will continue to support their implementation.
It went on to say that the British banking system was “well capitalized and funded, and remains sound.”
The president of the European Central Bank, Christine Lagarde, praised the “rapid action” of the Swiss authorities.
Ms. Lagarde added, “The euro area banking sector is resilient, with strong capital and liquidity positions.”
Yellen and Powell agreed that the US banking sector was “resilient.”
Credit Suisse is the latest and most significant casualty of a confidence crisis that has already claimed the lives of two mid-sized U.S. banks and prompted an emergency industry bailout for another. However, this is distinct. Switzerland’s second-largest lender was regarded as one of the top 30 most significant banks in the world. Which is why the Swiss government hastened this acquisition.
Although the reasons for each failure vary slightly, the primary factor has been a sharp rise in global interest rates, which has impacted the value of even banks’ secure investments. This has frightened investors, resulting in a decline in the share prices of all banks, with the weakest institutions suffering the most.
The financial authorities of the EU, the United States, and the United Kingdom have stated that they support this agreement, emphasizing that banks are robust and that people’s savings and deposits are secure.
When financial markets open on Monday, the true measure of whether this Swiss rescue has calmed nerves in the financial world will be revealed, which is why it was crucial to get this done on Sunday night.
