Dhe European Central Bank (ECB) has welcomed the measures to take over the ailing Credit Suisse by its competitor UBS. ECB President Christine Lagarde stressed on Sunday evening that she welcomed the swift action and decisions taken by the Swiss authorities. “They are critical to restoring orderly market conditions and ensuring financial stability.”
According to Lagarde, the euro area banking sector is resilient and has strong capital and liquidity positions. “In any case, our policy toolkit is fully equipped to provide liquidity to the euro area financial system when needed and to ensure the smooth transmission of monetary policy,” stressed Lagarde.
The head of the US Federal Reserve, Jerome Powell, and US Treasury Secretary Janet Yellen also speak of a step to support financial stability in a joint statement. The capital and liquidity of the US banking system are strong and the US financial system is resilient, it said.
loss of investor confidence
The Bank of England also welcomed the deal. The UK banking system is well capitalized and well funded and remains safe, says the UK central bank. According to insiders, international players had urged Switzerland to act quickly at Credit Suisse in the past few days.
Colm Kelleher, Chairman of the Board of Directors of UBS Group, said: “This is a huge opportunity for us.” The combination of both banks strengthens the position of UBS. According to UBS, the merger will create a company with more than $5 trillion in assets under management. She will further strengthen UBS’s position as a leading global wealth manager based in Switzerland.
The lurching major bank Credit Suisse had recently suffered from a significant loss of investor confidence. The share price had fallen to a record low after the bank’s largest investor ruled out providing further capital and the institution continued to struggle with cash outflows.
In the entire past financial year, Credit Suisse customers had withdrawn assets of around CHF 123 billion. The market value of the traditional bank founded in 1856 has fallen by around two thirds in the past twelve months. At its peak in the mid-nineties, the bank was worth more than 110 billion francs. Most recently, Credit Suisse was only worth the equivalent of 7.46 billion euros on the stock exchange, while UBS was worth the equivalent of around 60.8 billion euros.
The balance sheet total of UBS with more than 72,000 employees amounted to the equivalent of 1030 billion euros in 2022, that of Credit Suisse with a good 50,000 employees to the equivalent of 535.44 billion euros. UBS had made a profit of $7.6 billion in 2022 (currently $7.07 billion). Credit Suisse, on the other hand, reported a loss of CHF 7.3 billion (EUR 7.4 billion).