UBS will acquire Credit Suisse in a deal that aims to stem what was quickly becoming a global confidence crisis.

Credit Suisse, a 167-year-old troubled lender, was brought to the brink by financial calamity last Wednesday, despite receiving a $54bn (PS44bn), credit linefrom Switzerland’s central banks.

Although the credit line was established in an attempt to reassure markets and depositors, it did not stop a flood of customer withdrawals. The Swiss government requested that the UBS rival be considered a takeover.

UBS will buy Credit Suisse for 3bn Swiss Francs (PS2.6bn).

Advertisement

One part of the deal includes 100 billion Swiss francs (PS88.5bn), which will be used to provide liquidity assistance for both banks.

Colm Kelleher (chairman of UBS Group) said that the deal “represents tremendous opportunities”, and added that Credit Suisse’s long-term goal would be to reduce its investment banking business and align it the UBS “conservative culture”.

Credit Suisse chairman Axel Lehmann described the day as “historical, sad, and very challenging” for his bank, Credit Suisse, and the global market.

He stated that the merger announced was the best outcome possible, given recent extraordinary and unpredicted circumstances.

“This has been a very difficult time for Credit Suisse. While the team worked tirelessly to address many legacy issues and implement its new strategy, today we have to find a solution that will last.”

The Swiss central bank and other officials stated that the agreement was “a solution…to ensure financial stability and protect Swiss economy in this extraordinary situation”.

It is also hoped UBS’s acquisition of its old rival will prevent the spread of the same financial crisis that occurred in 2008.

The US and UK central banks welcomed the news.

According to the Bank of England, “We have been working closely with international counterparts during preparations for today’s announcements and will continue supporting their implementation.”

“The UK’s banking system is safe and sound, with a well-capitalized and adequately funded structure.”

Credit Suisse is one the largest wealth managers in the world and also ranks among the 30 banks considered systemically important. This means that the deal will likely ripple across global markets on Monday.

It employs approximately 5,000 people and is one of the biggest investment banking companies in London.

This comes after a tough few weeks for banks, which saw the collapse of US lenders Silicon Valley Bank & Signature Bank.

SVB’s UK branch was rescued from HSBC by PS1. However, a number other American lenders were also forced to apply for emergency funding.