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A financial and banking tsunami hits the two coasts of the Atlantic

2023-03-20T03:08:33.213Z


Rubén Segal, a lawyer and expert in financial matters, analyzes from Geneva the agreement reached by Credit Suisse with its most important competitor, UBS. He assures that the last word has not been said.


The Credit Suisse crisis has created

enormous uncertainty

about the stability of the global economic and financial system.

It is one of the largest banks in the world,

founded in Zurich in 1856, which has more than 50,480 officers and employees,

of whom 16,700 work in Switzerland, and which has been a pillar of the country's industrial and economic development. .

Late last night, the government of the Swiss Confederation at an eagerly awaited press conference from Parliament in Bern, together with the Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA), reported of an agreement that Credit Suisse

had reached with its most important competitor, UBS.

The

latter, even larger than the former and founded in Winthertur in 1862,

currently has 72,597 civil servants and employees, of whom 20,300 are in Switzerland.

Both banks, given their importance and transcendence, are among

the thirty systemically important banks worldwide.

In said conference the good news of the acquisition of Credit Suisse by UBS was announced, a fact that, without a doubt, decompressed both the international pressure received by the country and that of the internal market itself that the persistent drop in the price of the shares of the first, it had been shown as an undeniable, irreversible and fatal consequence of the loss of confidence in the bank.

The proximity of the opening of the markets imposed the urgency and imminence of a solution at any price.

The Swiss Government, meeting for three days with its highest authorities,

had ruled out applying the solution of the "To big to fail" legislation (too big to fail)

issued in 2014, assuming with conviction and decision that in a stormy sea it would not be possible and useless, moreover, to

try to tow the Titanic to the coast

.

On the other hand, all other means should be exhausted, without declining ample financial support, since it was a first priority to ensure the contribution of liquidity.

For this purpose, it was decided

to guarantee the bank in crisis the sum of fifty thousand million Swiss francs

, which was later increased.

On Friday, the volatility of the market revealed that all efforts were insufficient: the stock fell, confidence was far from being restored, and a different, quick and larger solution was clearly required to guarantee stability.

The solution comes after the fact with the proposal and its subsequent improvement, consisting of the absorption or merger of Credit Suisse by the UBS.

The Government blesses the agreement and guarantees the general framework between these two giant private operators.

The agreement has been the

result of a winding and strategic negotiation, whose sequence has been interrupted several times,

beginning as usual with an offer considered derisory consisting of the payment of 0.25 cents of Swiss francs per share, equivalent to a total of about thousand million francs, which was

emphatically rejected, how could it be otherwise, by the main shareholder, the Saudi National Bank.

In addition,

the possible acquirer demanded that the State give him certain guarantees and loans to carry out the operation.

The option of nationalizing the bank, either totally or partially, was not absent, a solution that was quickly discarded.

The unavoidable and urgent opening of the markets on Monday morning;

the explicit support of the Swiss National Bank, which plays the role of Central Bank;

the acceptance as regulator of FINMA, as well as regulators from other countries where the bank has headquarters, and the impressive figure of one hundred billion francs committed as a loan by the State worked the miracle that the aforementioned acquisition agreement came to

light .

The government considers that it is the best solution to

restore the confidence

that has been lacking in recent times in the financial markets.

as Alain Berset, the president of the Confederation, recognized at the press conference.

The completion of the agreement meets not only the laudable objective of protecting the Swiss financial market but also stabilizing international financial markets, since the fall of that single bank would have had incalculable consequences not only for Switzerland but also for other countries.

The essence of the agreement

Credit Suisse shareholders

will receive one UBS share for every 22.48 shares they hold

, which corresponds to a value of 0.76 Swiss franc cents per share for a total sum of three billion Swiss francs .

In addition, in order for the acquirer to assume potential losses on certain assets above a certain amount, the government will give UBS nine billion Swiss francs. defined, presumably clarifying it would contribute to calming the turbulent waters of the unleashed tsunami.

No less important, and I would say unforgivable, would be to omit to clarify and, where appropriate, repress with all legal force the personal responsibilities in the bank's crisis that its leaders and officials may have incurred.

The last word has not been said:

on the success or failure of the transaction, the market will pronounce itself through the price of the shares and the CDS (Credit Default Swaps or Differentials of Credit Default) of the acquirer.

Source: clarin

All news articles on 2023-03-20

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