Banking giant UBS will buy ailing rival Credit Suisse, in a deal approved by the Swiss government to avoid further chaos in the markets after a string of major financial failures.
FINMA, the Swiss market watchdog, approved the takeover, which followed difficult talks between bank chiefs and ministers desperate to secure a deal before trading begins on Monday.
Sources familiar with the negotiations said FT There was limited communication between the two banks, as the terms were heavily influenced by the Swiss National Bank (SNB) and Finma.
UBS, an international investment bank based in Switzerland, will pay $2 billion (£1.64 billion) to take over its smaller rival, far less than the price that would have been expected under less urgent circumstances.
In a statement, the Swiss National Bank and government officials said the agreement represented “a solution … to secure financial stability and protect the Swiss economy in this exceptional situation.”
Credit Suisse, 167, came to the brink of financial disaster this week despite an emergency £45 billion loan from the Swiss central bank after its shares plunged amid investor fears.
The loan was agreed in a move intended to reassure markets and depositors, but it failed to stem a rush of withdrawals by account holders, prompting the Swiss government to seek a merger.
Credit Suisse is one of the 30 systemic global banks considered important to the global financial architecture. Industry experts expect its problems to have an indirect impact on global banking.
At least two major banks in Europe are studying contagion scenarios in the continent’s banking sector and are looking to the Federal Reserve and European Central Bank for stronger signals of support, two senior executives close to the discussions told Reuters.
The two executives told Reuters on Sunday that there are concerns about the repercussions of the crisis of confidence in Credit Suisse and the failure of two US banks that will have ripple effects in the financial system next week.
Credit Suisse is one of the largest employers of investment banking in the City of London, employing around 5,000 people.
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