UBS reportedly seeks $6 billion in government guarantees for Credit Suisse takeover

UBS is asking the Swiss government to cover costs of about $6 billion if it buys Credit Suisse, people familiar with the matter said.

Credit Suisse, 167, was the biggest name caught in the turmoil unleashed by the failures of US lenders Silicon Valley Bank and Signature Bank over the past week, fueling a crash in bank stocks and spurring regulators. began to rush extraordinary measures to maintain Banks are floating.

The $6 billion government guarantee UBS is seeking could cover the partial closure costs of Credit Suisse and potential litigation costs, two people familiar with the matter told Reuters.

One of the sources said talks to resolve the credit crisis with Credit Suisse faced serious obstacles and could have to cut 10,000 jobs if the two banks merged. I warned you that there is potential.

Swiss regulators race to present a solution for Credit Suisse before markets reopen on Monday, but the complexity of combining the two giants raises the possibility that negotiations will continue until Sunday. There is a situation.

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

A frenetic weekend of negotiations comes after a brutal week for bank stocks and efforts in Europe and the US to strengthen the sector. The Joe Biden administration in the United States made moves to protect consumer deposits, but the Swiss central bank lent billions of dollars to Credit Suisse to stabilize its volatile balance sheet.

Swiss authorities had pressured UBS to end the crisis by buying a local rival, according to two people familiar with the matter. Under this plan, Credit Suisse’s Swiss business may be spun off.

The Financial Times reported, citing two people familiar with the matter, that Switzerland was preparing to take emergency measures to expedite the deal.

Bloomberg News reported, citing people familiar with the matter, that U.S. authorities were involved and were working with Swiss authorities to help broker the deal.

UK Finance Minister Jeremy Hunt and Bank of England Governor Andrew Bailey are also in regular contact this weekend over the whereabouts of Credit Suisse, sources familiar with the matter said. Spokesmen for the UK Treasury and the Bank of England’s prudential regulator, which oversees lenders, declined to comment.

Credit Suisse shares lost a quarter of their value last week. Central banks forced him to raise $54 billion in funding as he tried to recover from a series of scandals that eroded investor and customer confidence.

The company ranks as one of the world’s largest wealth managers and is considered one of the 30 global systemically important banks whose failures will ripple through the financial system.

Banking sector fundamentals are stronger than during the 2008 global financial crisis, and the global system is less interconnected, Goldman analyst Lotfi Karooi wrote in a note to clients late Friday. I’m here. This limits the risk of “potential vicious circles of counterparty credit losses,” Karui said.

“But a stronger policy response is likely to be needed to bring some stability,” Karooi said. The bank said the uncertainty over Credit Suisse’s future will put pressure on the European banking industry as a whole.

A senior central bank official said on Saturday that high interest rates in major developed economies could continue to cause problems for the financial system.

There have been multiple reports of interest in Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was considering a possible purchase of some of the assets, but U.S. financial giant BlackRock denied reports it was participating in a rival bid for the bank.

California-based Silicon Valley Bank’s collapse shows how relentless interest rate hike campaigns by the US Federal Reserve and other central banks (including this week’s European Central Bank) are putting pressure on the banking sector embossed. The SVB and Signature bankruptcies are the second largest bank failure in U.S. history and his third, after Washington Mutual’s collapse in the 2008 global financial crisis.

Bank stocks have taken a beating around the world since the SVB collapsed, with the S&P Bank Index down 22%, the biggest two-week loss since the pandemic rocked markets in March 2020.

A major US bank put a $30 billion lifeline into small lender First Republic. US banks combined recently asked the Federal Reserve for his record $153 billion in emergency liquidity.

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

Mr. Biden called on Congress to give regulators greater powers, including raising fines, recovering funds and barring officials from failed banks.