Time is money in the operation to save Credit Suisse. According to has reported the Financial Times this Saturday, the Swiss government is willing to allow UBS to break some rules so that the merger between the two largest entities in the country can become a reality as soon as possible. Specifically, the Executive would implement emergency measures so that UBS could ignore the obligation to give shareholders a consultation period of six weeks.
The markets have demonstrated in the last week their capacity to cause the stock market collapse of those entities about which there is distrust. And Credit Suisse is in that situation right now: as was to be expected in the midst of the sea of negative news, the outflow of deposits from the bank is accentuating, a difficult wheel to stop when it starts to turn. According to him FTdeposit outflows exceeded 10 billion euros a day at the end of last week.
Given this massive withdrawal, the search for an agreement before the Stock Markets open on Monday becomes more important. A failure of the same would probably cause a new stock market crash at an already delicate moment for the financial system due to the fragility of the US regional banks. This Saturday the meetings have been reproduced. In Bern, the country’s capital, the Swiss Federal Council held an emergency meeting on which its participants did not want to comment, according to local press reports.
Although their Zurich headquarters are only a few meters apart, the two largest Swiss lenders are on opposite paths. While UBS made more than $7 billion in 2022, Credit Suisse lost a similar amount. Its value on the stock market is uneven: 56,000 million compared to 7,000 million approximately. And in volume of assets UBS has 1.1 trillion and Credit Suisse with 574,000 million.
The size of the transaction transcends the Swiss borders. According to him FT, regulators in the US, UK and Switzerland are studying the legal structure of the deal. UBS is in a strong position in the deal because it takes the risk of bailing out Credit Suisse, seeking to take advantage of the capital rules that apply to the world’s biggest banks. And fearing that Credit Suisse, after years of scandals and losses in its results, still hides a dead person in the closet, he demands guarantees that future legal expenses will be covered. Only in 2022 Credit Suisse has already reserved 1,200 million for that item, and according to its calculations the total amount in investigations and unresolved legal cases could double.
According to the agency ReutersUBS would be seeking to obtain government guarantees worth 6,000 million dollars (5,600 million euros), and the merger would mean 10,000 layoffs.
UBS has benefited from the Credit Suisse debacle by capturing many of the customers who have fled the bank. In a moment of uncertainty, they have chosen it as a natural destination as it is the largest entity in the country. But at the same time, a banking crisis that damages the reputation of the Swiss financial system, and threatens to cause a contagion effect, could also make you a victim.
The speed at which events happen is frantic. Discussions are accelerating just two days after the Swiss National Bank agreed to grant Credit Suisse loans of up to 50 billion euros. The public bailout was initially seen by investors as a powerful lifeline that would keep the bank afloat in the short term. The movement became necessary after its main shareholder, the Saudi National Bank (SNB), threw a jug of cold water by announcing that it would no longer provide more funds, thus leading to a collapse in the stock market. Their titles recovered a good part of the ground lost in the session on Thursday, the day the injection of liquidity from the central bank was known, but the doubts did not take long to return, and the new blow to the action this Friday, of 8%, which dragged down the main stock indices in Europe and the US, made it clear that the perception of the bank is still far from positive.
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