Beijing, March 19 (Xinhua) -- Credit Suisse, Switzerland's second-largest bank, was plunged into crisis by the closure of the Silicon Valley Bank in the United States, triggering an emergency rescue operation by Swiss regulators. A number of media reported on the 18th that under the promotion of regulators, Switzerland's largest bank UBS Group (UBS) is considering acquiring Credit Suisse and has started relevant preliminary negotiations.
However, the merger of the two banking giants is a "complex project" that may face many obstacles. Some analysts pointed out that under the background of the continuous interest rate hikes of the United States and the European Central Bank, the banking industry in the United States and Europe continues to be under pressure and the crisis of confidence is difficult to solve.
Need for a "strong response"
According to the Financial Times, UBS is in talks to acquire Credit Suisse in whole or in part, with the approval of Swiss central bank, Swiss National Bank. Swiss National Bank "hopes that the two banks will reach a simple and straightforward merger plan before the stock market opens on the 20th."
European bank stocks have generally plummeted over the past week, affected by the closure of Silicon Valley Bank and Signature Bank in the United States. Credit Suisse has been questioned due to operating losses, poor internal control and other issues, coupled with the recent statement of major shareholders that they will not continue to inject capital, resulting in further setbacks to investor confidence, and Credit Suisse's stock price plunged about 30% to a historical low on the 15th.
This is a photograph of the building of Credit Suisse (Credit Suisse), Switzerland's second-largest bank, in Lucerne, Switzerland (pictured on February 13). Photo by Xinhua News Agency reporter Lian Yi
According to Reuters, after a "brutal week" in Credit Suisse's stock price, Swiss regulators launched an urgent action over the weekend, hoping to find a solution to Credit Suisse's current confidence crisis before the stock market opened on the 20th.
Credit Suisse is one of 30 global systemically important banks identified by global banking regulators as a crisis that could spill over into the global financial system and is seen as a "too-big-to-fail" financial institution. Reuters, Bloomberg and other media quoted multiple sources as saying that this weekend, many governments and regulators in the United States and Europe communicated and coordinated with the Swiss side on the Credit Suisse crisis.
Lutfi Carrui, an analyst at Goldman Sachs in the United States, said that compared with the 2008 global financial crisis, the risk of the global banking industry falling into a "vicious circle" caused by a bank crisis is now limited, but the Credit Suisse crisis still "requires a stronger policy response to bring stability."
There are many barriers to consolidation
According to AFP, Credit Suisse has been in trouble over the past two years, with proposals from UBS to buy Credit Suisse from time to time. However, similar proposals have usually been overturned because both banks are already giants, and a merger of this magnitude is "extremely complex" and could raise concerns about competition monopolies and affect the stability of the Swiss financial system.
A man walks past Credit Suisse, Switzerland's second-largest bank, in Geneva, Switzerland, on March 16. Photo by Xinhua News Agency reporter Lian Yi
Reuters quoted two sources as saying that UBS and Credit Suisse, the country's main "rival", began merger negotiations under pressure from the Swiss government and regulators. If the merger is completed, Credit Suisse's domestic business could be divested. UBS asked the Swiss government for a $6 billion bond to cover possible costs and losses involved in the merger.
One of the sources warned that merger talks had hit "significant hurdles" due to the complexity of the "big job" and could cut about 10,000 jobs if the two banks merged.
According to the Financial Times, the Swiss side is ready to take "urgent measures" to speed up the merger negotiation process, looking forward to reaching an agreement as early as the evening of the 18th. However, Reuters reported on the 19th that consultations continued on the same day.
Confidence is hard to regain
While the Swiss Financial Market Supervisory Authority and the central bank claim that Credit Suisse "meets the stringent capital and liquidity requirements required by systemically important banks" and that the central bank has provided Credit Suisse with a 50 billion Swiss franc (1 Swiss franc about US$1.08) loan to enhance liquidity, restoring investor and customer confidence still faces challenges.
A woman stands inside Credit Suisse, Switzerland's second-largest bank, in Geneva, Switzerland, March 16. Photo by Xinhua News Agency reporter Lian Yi
The Financial Times, citing sources, reported that the total daily withdrawals of Credit Suisse customers reached CHF 10 billion on a recent day, indicating that customers' trust in the bank has plummeted.
Reuters analysis, the closure of Silicon Valley Bank and Signature Bank in the United States highlights the pressure on the banking industry caused by the continued interest rate hikes of the US Federal Reserve, the European Central Bank and many central banks, and high interest rates in major developed economies may continue to cause financial system problems. (Gao Jie)