UBS Group AG is reportedly in talks to acquire Credit Suisse or at least a portion of it after a lifeline of emergency money failed to rekindle investor faith in the smaller Swiss bank. The boards of Switzerland’s two largest lenders are expected to meet separately over the weekend to explore a settlement, according to information acquired by NewsOTG. Following the revelation, shares of Credit Suisse increased by 9% in after-hours trading; however, neither bank offered any comments. The market instability brought on by the failure of American lenders Silicon Valley Bank and Signature Bank over the past week has severely hurt Credit Suisse, a 167-year-old bank, and compelled it to use $54 billion in central bank funding. In an effort to determine the bank’s future course, meetings for Credit Suisse executives were scheduled for the weekend.
Five sources with direct knowledge of the situation claim that at least four major banks, including Societe Generale SA and Deutsche Bank AG, have placed limits on their trades involving Credit Suisse or its securities. Frederique Carrier, head of investment strategy at RBC Wealth Management, said, “The Swiss central bank coming in was an essential step to quiet the flames, but it might not be sufficient to restore trust in Credit Suisse, therefore there’s talk about extra measures.” Politicians have worked to reassure investors and depositors that the international banking system is secure, notably the European Central Bank and U.S. President Joe Biden. Nonetheless, worries about deeper issues in the industry continue. While American banks as a whole recently requested a record $153 billion in emergency liquidity from the Federal Reserve, huge U.S. banks this week had to offer a $30 billion lifeline for smaller lender First Republic. This was higher than the previous record, which had been set almost 15 years earlier, during the height of the financial crisis.
With “funding and liquidity challenges on banks, exacerbated by decreasing depositor confidence,” rating agency Moody’s reduced its outlook on the American banking system to “negative.” In response, President Biden has urged Congress to grant regulators more authority over the banking industry, including the ability to levy heavier fines, seize funds, and prohibit employees from failing banks. Also, a number of Democratic politicians in the United States have asked the Justice Department and regulators to look into Goldman Sachs’ involvement in Silicon Valley Bank’s demise. The banking industry is under increasing pressure for stronger monitoring and accountability as a result of Credit Suisse’s and the industry’s overall growing problems.
