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#AceBusinessDesk – Talks over rescuing Switzerland’s second-largest bank, Credit Suisse, rolled into Sunday as UBS sought $US6 billion from the Swiss government to cover costs if it were to buy its struggling rival, a person with knowledge of the talks said
Authorities are scrambling to resolve a crisis of confidence in the 167-year-old Credit Suisse, the globally significant bank caught in the turmoil spurred by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past week.
While regulators want a resolution before markets reopen on Monday, one source cautioned the talks are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine.
The guarantees that UBS, Switzerland’s largest bank, is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, two people told Reuters.
Credit Suisse, UBS and the Swiss government declined to comment.
An acquisition of this size is dauntingly complex.
The Swiss competition commission could also raise eyebrows depending on how any takeover by UBS might be configured.
Too big to fail?
The Swiss government held an urgent meeting to discuss the Credit Suisse situation on Saturday evening in the capital Bern.
The government’s spokesman refused to comment on the talks, Swiss news agency ATS reported.
The Neue Zurcher Zeitung newspaper said the government met at the finance ministry for a meeting that lasted about two hours, with several experts and officials taking part.
Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks — of such importance to the international banking system that they are deemed too big to fail.
“We are now awaiting a definitive and structural solution to the problems of this bank,” French Finance Minister Bruno Le Maire told Le Parisien newspaper.
” We remain extremely vigilant and mobilised.”
According to the FT, citing two unnamed sources, Credit Suisse customers withdrew 10 billion Swiss francs in deposits in a single day late last week — a measure of how trust in the bank has fallen.
After a turbulent week on the stock market, which forced the SNB to step in with a $US54 billion ($81 billion) lifeline, Credit Suisse was worth just over $US8.7 billion on Friday evening — precious little for a bank considered as one of 30 key institutions worldwide.
Status quo not an option
Analysts at financial services giant JPMorgan, insisting that “status quo is no longer an option”, considered the scenario of a takeover by another bank, with UBS “the most likely”.
The idea of Switzerland’s biggest banks joining forces regularly resurfaces, but is generally dismissed due to competition issues and risks to the Swiss financial system’s stability, given the size of the bank that would be created by such a merger.
“The question arises because there are many candidates which might be interested,” said David Benamou, chief investment officer of Paris-based Axiom Alternative Investments.
“However, the Credit Suisse management, even if forced to do so by the authorities, would only choose (this option) if they have no other solution,” he said.
The bank is starting to roll out its restructuring plan laid out in October, while UBS has spent several years addressing its own issues.
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