The discussions are the latest development in more than a week of panic and fear over the stability of the global financial system and efforts by Wall Street and regulators to prop up big financial institutions after the collapse of a Silicon Valley bank.
The Financial Times reports that major banking regulators in the US, UK and Switzerland are also reviewing the legal structure of the deal, as UBS seeks some form of government approval for concessions, including future legal costs. Credit Suisse shares rose 7 percent in after-hours trading.
Credit Suisse and UBS declined to comment. The Swiss National Bank and the US Federal Reserve did not immediately respond to requests for comment.
According to Bloomberg News, Germany’s Deutsche Bank is looking to buy certain Credit Suisse businesses.
The merger could limit fears that the turmoil at Credit Suisse and many troubled financial institutions in the United States could trigger a banking contagion similar to the events of the 2008 financial crisis. Even after this week’s actions by governments and financial institutions, the stock market expressed concern that the turmoil in the banking sector has not subsided. However, analysts say the financial system appears to be on solid footing and the volatility in the stock market may reflect news rather than a sign of a wider crisis.
The discussions add to a week of chaos for Credit Suisse. On Thursday, the Swiss central bank provided $53.7 billion in liquidity to the company after it found “material weaknesses” in its financial reporting.
But Credit Suisse’s major problems predate recent troubles at banks in the United States. The 167-year-old bank, which originally served the ultra-wealthy, has been plagued by financial losses, risk and compliance issues and critical data breaches. In October, Credit Suisse announced that it had significantly withdrawn client funds and incurred large losses in 2021 due to the collapse of New York-based Archegos Capital Management.
The moves in Europe follow Thursday’s announcement that 11 of the largest banks in the United States will deposit $30 billion into First Republic Bank. The move is aimed at strengthening the bank and signaling the broader safety of the US financial system. Meanwhile, the Silicon Valley bank’s parent company filed for Chapter 11 bankruptcy on Friday.
