Red pedestrian crossing signs outside the Credit Suisse Group AG bank branch in Basel, Switzerland, Tuesday, October 25, 2022.
Stephen Wermuth | Bloomberg | Getty Images
talks about saving credit Suisse as sunday rolled UBS A person with knowledge of the talks said the Swiss government had been asked for $6 billion to cover costs if it were to buy its struggling rival.
Officials are scrambling to resolve a crisis of confidence at 167-year-old Credit Suisse, which has been plunged into turmoil over the past week due to the collapse of US lenders Silicon Valley Bank and Signature Bank.
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While regulators want a solution before markets reopen on Monday, one source cautioned that the talks face significant hurdles, and could have to cut up to 10,000 jobs if the two banks combine.
Two people told Reuters that the guarantees UBS is seeking would cover the costs of closing parts of Credit Suisse and possible litigation fees.
Credit Suisse, UBS and the Swiss government declined to comment.
The frenetic weekend talks follow a brutal week for banking stocks and efforts in Europe and the US to shore up the sector. 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 take over 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.
Berkshire HathawayA source told Reuters that Warren Buffett has discussed the banking crisis with senior Biden administration officials.
The White House and US Treasury declined to comment.
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. The bank was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined investor and customer confidence.
It is one of the world’s largest wealth managers and is considered one of the 30 global systemically important banks – the failure of any one would ripple through the entire financial system.
There were several reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was considering 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.
interest rate risk
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 on Thursday, is putting pressure on the banking sector.
The collapses of SVB and Signature are among the largest bank failures in US history, behind the demise of Washington Mutual during the global financial crisis in 2008.
Bloomberg News reported Saturday that First Citizens is evaluating an offer for Bankshare SVB and is seriously considering at least one other offer.
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 republic, US banks have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.
The Mid-Size Bank Coalition of America asked regulators to extend federal insurance to all deposits for the next two years, Bloomberg News reported Saturday, citing a letter from the coalition.
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.
Fast and dramatic events could mean that larger banks go bust, smaller banks may be forced to stay afloat and more regional lenders may close.
“People are really moving their money around, all these banks are going to look fundamentally different in three months, six months,” said Keith Norica, vice president of Petomac Global Partners and former US comptroller of the currency, a Republican.
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