UBS buying Credit Suisse for $3.25b with Swiss help ‘is no bailout’

Does UBS buying Credit Suisse for $3.25 billion with Swiss help stem banking crisis contagion or is it a bailout? Swiss finance minister Karin Keller-Sutter said this on the topic Sunday, March 19:

This is no bailout. This is a commercial solution. [Credit Suisse] bankruptcy would have had huge collateral damage on the Swiss financial market and with a risk of contagion internationally. The US and UK were very grateful for this solution.

To backstop losses UBS might incur for rescuing Credit Suisse, the Swiss government is providing $9.7 billion. To help the deal, the Swiss National Bank is also providing $108 billion of liquidity to UBS.

The ‘commercial solution’ part of Keller-Sutter’s comment is true. The government isn’t taking over Credit Suisse, UBS is. With government help.

Also true is letting one of 30 most systemically important banks in the world fail would have much worse impacts than having government aid the deal.

When bank customers can’t get their assets or borrow, it has ripple effects in the economy for everyday people.

And when it’s a bank this big, a collapse would then trigger panic across banks globally, and the problem cascades — aka contagion.

Critically, FINMA noted that it’s business as usual for both banks and customers:

All bank services to remain available without interruption. On this basis, it will be possible to continue all the business activities of the banks with no restrictions or interruptions. This will ensure protection for depositors as accounts, security accounts and other services (counters, ATMs, e-banking, debit and credit cards) will likewise remain accessible as usual.

This will hopefully calm markets as we move into week 3 of this bank crisis Monday, March 20.

This deal will combine $1.1 trillion and $575 billion in assets from UBS and Credit Suisse, respectively.

Swiss regulator FINMA announced that Credit Suisse tier 1 bonds valued at about $17.3 billion would be written down to $0.

UBS announced that, with Credit Suisse, they’d now have $5 trillion in invested assets under management for clients.

UBS Chairman Colm Kelleher noted the gravity of the situation:

This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.

Shotgun bank marriages in weekend races to ease market panic are never ideal, but it beats the alternatives.

Placing some links and a couple charts in our reference section below.


Swiss finance minister Karin Keller-Sutter on UBS deal vs. alternatives (Bloomberg YouTube)

Swiss regulator says $17.3b of Credit Suisse tier 1 bonds go to $0 (FINMA)

With Credit Suisse, UBS has $5 trillion in client invested assets (UBS)

UBS agrees to $3.25b gov’t engineered rescue deal for rival Credit Suisse (FT-paywall)

30 banks regulators think are most systemically important (TheBasisPoint)


– UBS vs. Credit Suisse market cap divergence in recent years – via WSJ

UBS vs. Credit Suisse market cap 2018-2023


– Credit Suisse lost $89b in market value from 2007 peak – via Bloomberg

Credit Suisse lost $89b in market value from 2007 peak

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