UBS reportedly seeking $6 billion in government guarantees for Credit Suisse acquisition

UBS Swiss is asking the government to cover the costs of about $6 billion if it has to buy credit SuisseA person with knowledge of the talks said as the two sides rushed to cobble together a settlement to restore confidence in the ailing Swiss bank.

Credit Suisse, 167, is the biggest name to be caught in the turmoil sparked by the collapses of US lenders Silicon Valley Bank and Signature Bank over the past week, sending banking stocks soaring and prompting authorities to take extraordinary measures. Bank floating.

Two people told Reuters that UBS is seeking a $6 billion government guarantee, which would cover the costs of closing parts of Credit Suisse and possible litigation fees.

One of the sources cautioned that talks to resolve the crisis of confidence at Credit Suisse face significant obstacles, and that 10,000 jobs could have to be cut if the two banks combine.

Swiss regulators are racing to offer a solution for Credit Suisse before markets reopen on Monday, but the complexities of combining the two giants raise the prospect that talks will last well into Sunday, the person said. who asked to remain anonymous because of the sensitivity of the credit card. Situation.

Credit Suisse, UBS and the Swiss government declined to comment.

The frenzied weekend of talks followed a brutal week for banking stocks and efforts to shore up the sector in Europe and the US. US President Joe Biden’s administration moved to backstop consumer deposits, while the Swiss central bank loaned billions to Credit Suisse to stabilize its shaky balance sheet.

Two people with knowledge of the matter said UBS was under pressure from Swiss authorities to acquire its local rival to bring the crisis under control. The plan could lead to the closure of Credit Suisse’s Swiss business.

Switzerland is preparing to use emergency measures to fast-track the deal, the Financial Times reported, citing two people familiar with the situation.

Bloomberg News, citing people familiar with the matter, reported that US authorities are working with their Swiss counterparts to help the broker.

A source familiar with the matter said British Finance Minister Jeremy Hunt and Bank of England Governor Andrew Bailey are also in regular contact this weekend over the fate of Credit Suisse. Spokespeople for the British Treasury and the Bank of England’s Prudential Regulation Authority, which oversees lenders, declined to comment.

Shares of Credit Suisse lost a quarter of their value last week. It was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined investor and customer confidence.

The company is one of the world’s largest wealth managers and is considered one of 30 global systemically important banks whose failure would spread throughout the financial system.

Banking sector fundamentals are strong and global systemic correlations are weak since the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a note to clients late Friday. That limits the risk of a “potentially vicious cycle of counterparty credit losses,” Karoui said.

“However, a more forceful policy response is needed to bring some stability,” Karaoui said. The bank said a lack of clarity over the future of Credit Suisse would put pressure on the wider European banking sector.

A senior official of China’s central bank said on Saturday that higher interest rates in major developed economies could spell problems for the financial system.

There were several reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at the possibility of buying some of its assets, while the US financial giant black Rock denied reports that it was participating in a rival bid for the bank.

The failure of the California-based Silicon Valley bank brought into focus how a relentless campaign to hike interest rates by the US Federal Reserve and other central banks, including the European Central Bank this week, was putting pressure on the banking sector. The collapses of SVB and Signature are the second and third largest bank failures in US history, behind the demise of Washington Mutual during the global financial crisis in 2008.

Banking stocks have tumbled globally since the SVB collapse, with the S&P Bank Index plunging 22%, its biggest two-week loss since the pandemic hit in March 2020.

Big US banks give small lenders a $30 billion lifeline first republicAnd US banks have collectively sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

In Washington, the focus has shifted to greater oversight to ensure that banks and their executives are held accountable.

Biden called on Congress to give regulators more power over the sector, including imposing higher fines, freezing funds and barring executives from failed banks.