UBS announced the successful finalization of its acquisition of troubled competitor Credit Suisse, marking a significant milestone after the Swiss government orchestrated a swift rescue plan to merge the nation’s top two banks.
This move aimed to protect Switzerland’s global financial standing and prevent market chaos. UBS confirmed the completion of the acquisition, valued at 3 billion Swiss francs ($3.3 billion), ahead of schedule. Consequently, Credit Suisse shares will cease trading on the Swiss and New York Stock Exchange. The merger raises concerns about substantial job cuts, legal disputes, and the risks associated with creating a “too big to fail” Swiss megabank.
UBS CEO Ermotti acknowledges potential turbulence in the coming months but emphasizes commitment to a successful acquisition. Swiss government rescued Credit Suisse in March to prevent market disruption. UBS Group AG will oversee separate UBS and Credit Suisse entities. Credit Suisse’s history includes scandals like hedge fund losses and failure to detect money laundering. UBS takes on legal cases against Credit Suisse, including a compensation ruling for mismanagement of trust funds.
Credit Suisse is appealing a case in Bermuda and another case involving alleged fraudulent mismanagement of assets by a bank subsidiary. To cover potential losses from the takeover, UBS will receive 9 billion Swiss francs ($10 billion) in guarantees from the Swiss government. UBS will be responsible for the first 5 billion francs ($5.5 billion) of any losses. However, the emergency rescue plan is facing opposition ahead of parliamentary elections, with the lower house symbolically rebuking it and an inquiry being approved.
Credit Suisse investors have sued financial regulators after significant losses in higher-risk bonds. The takeover has been approved by the US Federal Reserve, the European Union, and other global entities, as Credit Suisse’s collapse was deemed a systemic risk.