Race against time save Credit Suisse. The Swiss authorities, with the collaboration of the British and American ones, are working tirelessly to find an agreement that will secure the Swiss giant and ease pressure on the entire banking sector. The road identified as the ‘only option’ to stem the crisis of confidence is that of un acquisition by Ubs. An agreement – it is the imperative – must be reached before the opening of the markets on Monday, possibly even earlier.
There are many knots to untie. Having set aside the initial skepticism of a forced wedding, UBS aims to obtain concessions from the Swiss central bank and from FINMA, the market regulator, to complete the agreement. These include some form of indemnity or help to cover possible legal costs and future losses.
One of the biggest obstacles, according to rumors, would be the investment banking division of Credit Suisse, on which Ubs would have raised concerns for the accumulated losses and for the scandals of which it was the protagonist. While working on the outlines of the agreement, with UBS which could buy 100% or only a part of Credit Suisse, Deutsche Bank monitors to see if there should be openings that would allow it to buy some assets of the bank led by Ulrich Koerner. While no formal proposal has been presented at this time, internal debate at Deutsche Bank is proceeding over which Credit Suisse assets might be attractive and at what valuation. However, BlackRock has denied a possible interest in the negotiations.
The American authorities are also participating in the work to quickly close an agreement considering that Credit Suisse and UBS have significant assets in the United States and are considered important at system level. For the US Treasury, an agreement between the two Swiss giants could translate into less pressure on American regional banks, and above all on First Republic. The institution has seen a rainstorm of sell-offs over the past week, closing on Wall Street down 72% despite a $30 billion injection from America’s 11 largest banks. Hit by a series of downgrades from major rating agencies, First Republic is evaluating its alternatives, including raising capital through the sale of shares in a private placement.
Credit Suisse is ‘Cedar’. Ubs is ‘Ulmus’. These are the code names used in negotiations with the Swiss authorities to identify the two banks. The Financial Times reports it, underlining that a meeting convened by the Ministry of the Treasury of Bern on the future of Credit Suisse is scheduled for the evening. UBS is seeking at least $6 billion in guarantees from the Swiss government for a possible takeover of Credit Suisse.
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