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UBS, Switzerland's largest bank, has agreed to buy its rival, Credit Suisse, for over 3 billion Swiss francs ($3.25 billion USD) to help stop financial panic after Silicon Valley Bank and Signature Bank were shut down in the US recently.
Here's the breakdown: Credit Suisse had been collapsing for a while, after years of scandals and top management changes led to clients pulling over 110 billion ($119 billion USD) Swiss francs out of the bank since 2021. It all started with the collapse of US investment fund Archegos, which left Credit Suisse with a $5.5 billion loss, but Saudi National Bank, their largest shareholder, bought 9.9% of the company to keep them going. Unfortunately, in March 2023, Credit Suisse's annual report for the past year reported "material weaknesses," which are the result of flaws or gaps in a company's internal control. This sparked concern over the latest bank collapses and whether Credit Suisse would fall as well, and the bank's shares fell by 30% after its biggest shareholder, Saudi National Bank, announced that it could not provide any more support to Credit Suisse because of regulatory concerns in its home country. To help the Swiss financial structure survive, the Swiss National Bank loaned Credit Suisse over $54 billion, which made it the first big bank to receive emergency funding since the 2008 financial crisis. Sadly, that didn't do much to save the bank, though it did help to give the company more time to figure things out. UBS is now buying the bank for $3.25 billion, but unfortunately, their shareholders will lose most of their money, and Swiss regulators say that the owners of 'additional tier one' bonds, worth over $17 billion, will lose everything.
By Armaan Dhawan
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