Emergency Measures For UBS’ Takeover Credit Suisse
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Emergency Measures For UBS’ Takeover Credit Suisse

written by John Murphy | March 19, 2023

Switzerland’s financial regulator is said to be preparing emergency measures to deal with the potential fallout from a UBS takeover of Credit Suisse, according to a report from the Financial Times.

Swiss Financial Market Supervisory Authority (FINMA) has reportedly drawn up contingency plans in case UBS, Switzerland’s largest bank, acquired its smaller rival Credit Suisse. The report follows a report in August, which claimed that the two banks had discussed a merger earlier this year.

The emergency measures could include restrictions on staff movements to prevent talent from leaving Credit Suisse and introducing additional capital requirements for UBS to avoid the need for a taxpayer bailout.

The plans also reportedly include the possibility of FINMA stepping in to take control of Credit Suisse’s assets in the event of a crisis.

UBS, which has been grappling with the challenge posed by negative interest rates in Switzerland, has seen its share price fall by around a quarter this year. Credit Suisse, meanwhile, has been hit by a series of scandals and is in the process of a major restructuring.

If a takeover were to go ahead, it would create a banking giant with a combined market value of around $136bn, making it one of the largest banks in the world.

However, the report notes that a UBS takeover of Credit Suisse is far from certain. Any deal would require regulators’ approval in Switzerland and other countries where the banks operate, as well as shareholders. Moreover, a merger of this scale would be highly complex and involve significant job losses, which would be politically difficult in Switzerland.

In response to the report, a spokesperson for UBS said:

“UBS does not comment on market rumors or speculation”.

A spokesperson for Credit Suisse said:

“We do not comment on market rumors or speculation”.

The potential merger would create a banking giant in a challenging environment for the industry. Banks are grappling with low-interest rates, which limit their profitability, and increased regulatory scrutiny in the wake of the financial crisis. The Covid-19 pandemic has further exacerbated these difficulties, with collapsing oil prices and falling demand for goods and services causing widespread economic disruption.

The Swiss banking sector has faced particular challenges, with negative interest rates squeezing profit margins and the longstanding tradition of banking secrecy coming under pressure from international tax authorities.

The country’s banks have also been hit by several scandals, including tax avoidance schemes and money laundering scandals.

The proposed merger of UBS and Credit Suisse could help the banks to weather these challenges by pooling their resources and sharing their expertise. However, it would also create a huge and complex organization, which would be difficult to manage and could present significant risks to the financial system.

The Swiss government and FINMA will undoubtedly be watching the situation closely and will be working to ensure that the country’s banking sector remains stable and healthy, whatever happens.

The emergency preparedness will allow the acquisition to proceed without the usual “six-week consultation period” with shareholders, according to people familiar with the situation.