GENEVA, Switzerland (AP) — Banking giant UBS is buying its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday night.
Berset, who did not specify a value of the deal, called the announcement “one of great breadth for the stability of international finance. An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
The Swiss president said the council had agreed to guarantee a total of 150 billion francs of liquidity to the 167-year-old bank, well beyond the 50 billion (54 million Swiss francs) figure that had been announced publicly. But that didn’t appear to be enough.
“We noted that the outflows of liquidity and the volatility of the markets demonstrated that necessary confidence could no longer be restored, and a rapid solution guaranteeing stability was essential.”
Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”
The combination of the two biggest and best-known Swiss banks, each with storied histories dating back to the mid-19th century, amounts to a thunderclap for Switzerland’s reputation as a global financial center — leaving it on the cusp of having a single national champion in banking. Part of the woes faced by Credit Suisse in recent years involved a spying scandal ordered by its executives to snoop on a former colleague who moved to UBS.
Berset said the Federal Council — Switzerland’s executive branch — had already been discussing a long-troubled situation at Credit Suisse since the beginning of the year, and held urgent meetings over the last four days amid spiraling concerns about its financial health that caused major swoons in its stock price and raised the specter of the 2007-2008 financial crisis.
Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s globally systemic important banks. This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.
Sunday’s news conference follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S….
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