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Credit Suisse is in advanced talks with its larger Swiss rival UBS about a deal to salvage Switzerland's second-biggest bank, in a bid to reassure investors before the markets open next week.
Key points:
- It has been reported UBS plans to buy part or all of Credit Suisse
- Credit Suisse is one of 30 banks deemed to be Global Systemically Important Banks
- The banks joining forces is generally dismissed due to competition issues
Embattled Credit Suisse was holding crisis talks this weekend with national banking and regulatory authorities, said reports.
According to the Financial Times newspaper, Switzerland's largest bank UBS was negotiating to buy all or part of Credit Suisse, with the blessing of the Swiss regulators.
An agreement could even be reached as early as Saturday evening (local time), the paper reported.
The Swiss National Bank (SNB) — the country's central bank — "wants the lenders to agree on a simple and straightforward solution before markets open on Monday," the FT's source said, while acknowledging there was "no guarantee" of a deal.
Credit Suisse, the SNB and the Swiss financial watchdog FINMA all declined to comment when AFP contacted them.
An acquisition of this size is dauntingly complex.
UBS would require public guarantees to cover legal costs and potential losses, according to a report by Bloomberg, citing anonymous sources.
The Swiss competition commission could also raise eyebrows depending on how any takeover by UBS might be configured.
Too big to fail?
The Swiss government held an urgent meeting to discuss the Credit Suisse situation on Saturday evening in the capital Bern.
The government's spokesman refused to comment on the talks, Swiss news agency ATS reported.
The Neue Zurcher Zeitung newspaper said the government met at the finance ministry for a meeting that lasted about two hours, with several experts and officials taking part.
Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks — of such importance to the international banking system that they are deemed too big to fail.
"We are now awaiting a definitive and structural solution to the problems of this bank," French Finance Minister Bruno Le Maire told Le Parisien newspaper.
"We remain extremely vigilant and mobilised."
According to the FT, citing two unnamed sources, Credit Suisse customers withdrew 10 billion Swiss francs in deposits in a single day late last week — a measure of how trust in the bank has fallen.
After a turbulent week on the stock market, which forced the SNB to step in with a $US54 billion ($81 billion) lifeline, Credit Suisse was worth just over $US8.7 billion on Friday evening — precious little for a bank considered as one of 30 key institutions worldwide.
Status quo not an option
Analysts at financial services giant JPMorgan, insisting that "status quo is no longer an option", considered the scenario of a takeover by another bank, with UBS "the most likely".
The idea of Switzerland's biggest banks joining forces regularly resurfaces, but is generally dismissed due to competition issues and risks to the Swiss financial system's stability, given the size of the bank that would be created by such a merger.
"The question arises because there are many candidates which might be interested," said David Benamou, chief investment officer of Paris-based Axiom Alternative Investments.
"However, the Credit Suisse management, even if forced to do so by the authorities, would only choose (this option) if they have no other solution," he said.
The bank is starting to roll out its restructuring plan laid out in October, while UBS has spent several years addressing its own issues.
AFP