Credit Suisse, UBS and their key regulators are working on a deal on the merger of Switzerland's two biggest banks, according to the Financial Times.
The Swiss National Bank and regulator Finma have told international counterparts that they regard a deal with UBS as the only option to stop a collapse in confidence in Credit Suisse CSGN, CS, Deposit outflows from the bank went up by 10 bn $10.8 bn a day last week, as fears for its health increased, according to the report.
The board of the two banks is meeting this weekend. Credit Suisse's key regulators in the US, the UK and Switzerland are considering the legal structure of a deal, and several concessions that UBS UBSG, UBS, has sought.
UBS wants to be able to phase in any demands it would face under global rules on capital for the world's biggest banks. One person said that the UBS has requested some form of indemnity or government agreement to cover future legal costs.
The Federal Reserve, Credit Suisse, the SNB, and UBS didn't want to say anything. The Bank of England and Finma did not respond to requests for comment.
The Swiss central bank was forced to provide an emergency SFr 50 bn $54 bn credit line to Credit Suisse after the possibility of a deal comes days after the Swiss central bank was forced to provide an emergency SFr 50 billion $54 billion credit line.
Credit Suisse shares jump as Swiss banking giant says it will borrow from SNB and buy back debt.
The chair admitted that an exodus of wealth management clients had continued, but it didn't stop it from falling to record lows in its share price, which has fallen to record lows after its largest investor ruled out providing any more capital.
There is a sharp divergence in the two banks fortunes due to the potential takeover.
Over the past three years, the shares of the UBS have gained about 120 per cent, while those of its smaller rival have plunged about 70 per cent. UBS has a market capitalization of $56.6 bn, while Credit Suisse closed trading on Friday with a value of $8 bn. In 2022, UBS generated $7.6 billion of profit, while Credit Suisse made a $7.9 billion loss, effectively wiping out the entire previous decade's earnings.
The Financial Times reported that the US investment giant BlackRock BLK had drawn up a rival approach, evaluated a number of options and talked to other potential investors. According to Bloomberg News, BlackRock denied it was working on a possible rival bid for Credit Suisse Group AG.
One of the biggest financial institutions in Europe would be created by a merger between UBS and Credit Suisse. Credit Suisse has $575 bn of assets on its balance sheet and UBS has $1.1 tn of total assets on its balance sheet.