UBS AG is asking Swiss government to cover about US $6 billion in costs if it were to buy Credit Suisse, a person with knowledge of the talks said, as the two sides tried to hammer together a deal to restore confidence in the ailing Swiss bank.
The collapse of US banks Silicon Valley Bank and Signature Bank has caused a rout in banking stocks and caused authorities to take extraordinary measures to keep banks afloat, and has caused a 167-year-old Credit Suisse to suffer from the turmoil.
Two people told Reuters that the US $6 billion in government guarantees that UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges.
One of the sources cautioned that the talks to solve the crisis of confidence in Credit Suisse are facing significant obstacles and 10,000 jobs may have to be cut if the two banks are combined.
Swiss regulators are trying to present a solution for Credit Suisse before markets reopen on Monday, but the complexities of combining two behemoths raises the possibility that talks will last well into Sunday, said the person who asked to remain anonymous because of the sensitivity of the situation.
Credit Suisse, UBS and the Swiss government didn't want to say anything.
The weekend negotiations come after a brutal week for banking stocks in Europe and the US to shore up the sector. The US president Joe Biden's administration backed off consumer deposits, while the Swiss central bank lent billions to Credit Suisse to stabilise its shaky balance sheet.
Two people with knowledge of the matter said that UBS was under pressure from the Swiss authorities to take over its local rival to get the crisis under control. Credit Suisse's Swiss business could be spun off, according to the plan.
Switzerland is preparing to use emergency measures to fast-track the deal, according to two people familiar with the situation, according to the Financial Times.
The Swiss counterparts are working with the US to broker a deal, according to those familiar with the matter, according to Bloomberg News.
A source familiar with the matter said that Britain's finance minister Jeremy Hunt and Bank of England Governor Andrew Bailey are in regular contact this weekend over the fate of Credit Suisse. Spokespeople for the Bank of England and the British Treasury declined to make a statement.