UBS, Credit Suisse face crisis as talks over deal stall

UBS, Credit Suisse face crisis as talks over deal stall

The Swiss banking giant is facing a crisis of confidence after the collapse of US banks Silicon Valley Bank and Signature Bank over the past week and UBS has offered to buy Credit Suisse for up to $1 billion. According to Bloomberg, the proposed deal is met with resistance from Credit Suisse.

The Swiss government plans to change country's laws to bypass a shareholder vote on the acquisition, as the offer from UBS is an all-share deal. The deal is set to be signed as soon as Sunday evening and will be priced at a fraction of Credit Suisse's closing price on Friday.

According to Bloomberg, the investment banking business of Credit Suisse is not showing much appetite for the government-orchestrated takeover, according to UBS.

Credit Suisse's plan to spin off its investment bank under the First Boston brand is in doubt due to the takeover talks. Plans to separate and eventually list that business are also in doubt.

UBS was previously reported to be looking for $6 billion to cover the cost of winding down parts of Credit Suisse and potential litigation charges. UBS insists on a material adverse change that voids the deal in the event of its credit default spreads jumps by 100 basis points or more, according to a report by Reuters.

One source cautioned that if the two banks combine, the talks are encountering a lot of obstacles, and 10,000 jobs may have to be cut. The Swiss Bank Employees Association called for the creation of a task force to deal with the risk to jobs on Sunday.

The frenzied weekend negotiations over the future of Credit Suisse followed a brutal week for banking stocks in Europe and the United States to shore up the sector. The US president Joe Biden's administration backed up consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilize its shaky balance sheet.