April 22, 2024

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UBS says it rushed into the unwanted merger to save Credit Suisse

UBS says it rushed into the unwanted merger to save Credit Suisse

HONG KONG (Reuters) – UBS Group (UBSGS) rushed to buy rival Credit Suisse Group AG (CSGN.S) in a deal it did not want, as a global banking crisis exacerbated the latest one. It showed a regulatory dossier, financial prompting the authorities to take swift action.

UBS, in a report filed Tuesday with the US Securities and Exchange Commission, told investors it has less than four days to conduct due diligence in light of “emergency circumstances.”

Losses were estimated at $17 billion from the acquisition.

Switzerland’s largest bank has agreed to buy out its smaller rival after the latter suffered a difficult year.

Credit Suisse’s involvement in a series of institutional failures spooked customers who began withdrawing their money, a trend that accelerated when US bank failures sparked fear of a broader banking crisis.

A wave of deposit outflows and a significant drop in share prices prompted the Swiss National Bank on March 15 to provide liquidity assistance to Credit Suisse.

And the UBS filing showed that the next day, UBS and Credit Suisse signed a confidentiality agreement under which the former began due diligence.

On March 19, the Swiss National Bank announced that UBS would buy Credit Suisse for 3 billion Swiss francs ($3.4 billion) in shares and incur a loss of up to 5 billion francs resulting from winding up part of the business.

The recording showed the final price hike of one billion francs at the start.

UBS’s interest in buying Credit Suisse began in October when its board’s ad hoc strategy committee reviewed the distressed position of its rival, according to the filing.

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By then, Credit Suisse was experiencing deposit and net asset outflows at levels far exceeding rates for the July-September quarter, UBS said.

In early December, UBS management made a preliminary assessment of the consequences of the Credit Suisse purchase, which it submitted to the Strategy Committee on December 19.

In February, both the Strategy Committee and the Board of Directors concluded the takeover was “undesirable” and recommended further analysis to prepare for a scenario in which Credit Suisse is in such difficulty that regulators may ask UBS to step in.

UBS said it conducted financial analyzes from January to mid-March and assessed potential legal structures and possible measures to address concerns, as well as any negative impact on itself, should authorities propose a takeover.

From December to mid-January, Credit Suisse executives were also discussing with the government its options including a merger with UBS, the UBS filing showed.

(Reporting by Ken Wu) Editing by Sumit Chatterjee and Christopher Cushing

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