UBS Group AG is apparently looking for a backstop from the Swiss government in order to buy Credit Suisse Group AG. In any agreement, UBS is considering situations in which the government would pay specific legal fees or other specific damages. The transaction is under investigation to prevent a confidence crisis that has emerged as a result of the failure of numerous smaller American institutions, which rattled the entire global financial system. One scenario would have UBS buy the wealth and asset management businesses of Credit Suisse while selling the investment banking division. The fate of Credit Suisse’s Swiss universal bank division, the only major part of the company to turn a profit last year, is still being discussed.
The two banks are reportedly talking about maybe making the announcement by Sunday night at the latest, though things are still a bit hazy and could change. An agreement facilitated by the government would address the possibility of counterparties or clients leaving Credit Suisse in the future, which might have an impact on the entire industry. UBS officials had been opposed to a planned combination with Credit Suisse because they wanted to concentrate on their own wealth management-centric strategy and were hesitant to take on risks associated with Credit Suisse.
Credit Suisse has accrued billions in legal damages over the past ten years while also being unprofitable. Many litigation and regulatory investigations are still pending. It revealed that it envisaged reasonably likely losses adding another 1.2 billion Swiss francs to that figure at the end of 2022, bringing its total legal provisions to 1.2 billion francs. Representatives from UBS and Credit Suisse declined to comment on the reports, and requests for comments made outside of business hours were not immediately answered by the Swiss government or finance ministry.
It would be a historic development for the country and the world of finance if the two Swiss banking behemoths, whose offices are across the Paradeplatz plaza in the heart of Zurich, combined. The Biden administration has moved to protect consumer deposits, and the Swiss central bank has loaned billions to Credit Suisse to stabilize its balance sheet as part of efforts by the Swiss banking sector to support the industry and regain confidence.
