UBS AG is asking the Swiss government to cover about $6 billion (AU$9 billion) in costs if it were to buy Credit Suisse, says a person familiar with the talks, as the two sides race to hammer out a deal together to restore confidence. in the ailing Swiss bank.
Credit Suisse, 167, is the biggest name ensnared in the turmoil created by the collapse of US lenders Silicon Valley Bank and Signature Bank last week, which sent a rout in bank stocks and prompted authorities to rush in with extraordinary measures to preserve it. Banks afloat.
Two people told Reuters the $6 billion in government guarantees UBS is seeking would cover the cost of terminating parts of Credit Suisse and potential litigation fees.
One source warned that talks to resolve the crisis of confidence in Credit Suisse face major hurdles, and 10,000 jobs may have to be cut if the two banks meet.
Swiss regulators are racing to offer Credit Suisse a solution before markets open Monday, but the complexities of bringing the two corporate giants together raise the possibility that talks will drag on into Sunday, said the person, who asked not to be identified.
Credit Suisse, UBS and the Swiss government declined to comment.
The frantic weekend negotiations come after a tough week for banking stocks and efforts in Europe and the US to support the sector.
US President Joe Biden’s administration moved to shore up consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilize its shaky balance sheet.
Two people familiar with the matter said UBS is under pressure from Swiss authorities to carry out an acquisition of its local rival to control the crisis.
The plan could lead to the breakup of Credit Suisse’s Swiss business.
The Financial Times reported that Switzerland was preparing to use emergency measures to speed up the deal.
Bloomberg News said US authorities were involved and were working with their Swiss counterparts to help broker a deal.
A source familiar with the matter said British Finance Minister Jeremy Hunt and Bank of England Governor Andrew Bailey are in regular contact about the fate of Credit Suisse.
Credit Suisse shares lost a quarter of their value last week. And it was forced to tap $54 billion in central bank funding as it tries to recover from a series of scandals that have undermined investor and customer confidence.
The company ranks among the world’s largest wealth managers and is considered one of the 30 systemically important global banks whose failure would ripple throughout the entire financial system.
Banking sector fundamentals were stronger and global systemic linkages were weaker than during the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a note to clients late Friday.
“However, a more forceful political response is likely to be needed to achieve some stability,” Karoui said.
There have been multiple reports of interest from Credit Suisse from other competitors. Bloomberg reported that Deutsche Bank was looking to buy some of its assets, while US financial giant BlackRock denied a report that it was involved in a competing bid for the bank.
The failure of the California-based Silicon Valley bank highlighted how a relentless campaign of interest rate hikes by the US Federal Reserve and other central banks was squeezing the banking sector.
The collapses of SVB and Signature are the second and third largest bank failures in US history after the demise of Washington Mutual during the global financial crisis in 2008.
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