Credit Suisse to be bought by UBS for about $1 billion: Report
Rachel Schilke
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UBS is reportedly narrowing in on a $1 billion deal to buy out Credit Suisse in the aftermath of record-low shares and spiraling fear over the strength of financial institutions from the collapse of Silicon Valley Bank.
Three people close to the bargain told the New York Times on Sunday that the Swiss government is close to announcing the deal. A nearly $54 billion bailout from the Swiss National Bank proved to be futile in keeping Credit Suisse afloat, as the Swiss bank was suffering from years of scandal and instability.
CREDIT SUISSE SHARES SLIDE 20% FOR SECOND ALL-TIME LOW IN SECOND CONSECUTIVE DAY
Credit Suisse’s shares soared up to 33% before settling at 25% on March 16, following a two-day, record-low decline in shares.
Under the terms of the proposed purchase, UBS will pay a fraction of the $9.5 billion value that Credit Suisse was estimated at on Friday. The Swiss government is likely to bypass typical financial rules that would slow down the deal, such as its six-week consultation period with shareholders before approving a transaction, per the New York Times.
The deal is expected to be announced later on Sunday, but anonymous sources told the outlet that the terms of the arrangement could change or still fall through.
While Credit Suisse’s failure is not directly linked to the collapse of Silicon Valley Bank in the United States, the hit in the Swiss bank’s stocks was amplified by investor fears resulting from the banking failure across the Atlantic.
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The California-based bank suffered a nearly billion-dollar negative cash balance over a week ago, with regulators shutting down the bank on March 9. The Federal Reserve, Justice Department, and Securities and Exchange Commission are investigating and reviewing the bank’s failure.
Treasury Secretary Janet Yellen testified before the Senate Finance Committee on Thursday to reassure Congress that the U.S. banking system “remains sound” despite a week of financial turmoil.