Credit Suisse, UBS deal: what you need to know

UBS has agreed to buy rival bank Credit Suisse for three billion Swiss francs ($A4.8 billion) and assume up to $US5.4 billion ($A8 billion) in losses, in a shotgun merger engineered by Swiss authorities to avoid further market-shaking turmoil in global banking.

DEVELOPMENTS

* Equity futures and Asian stocks struggled to stabilise on Monday, despite initial investor relief at the weekend deal to rescue Credit Suisse and promises of liquidity from central banks.

* Credit Suisse told staff its wealth assets are operationally separate from UBS for now, but once they merged clients might want to consider moving some assets to another bank if concentration was a concern.

* The Swiss Bank Employees Association said on Monday it was “deeply shocked” by the takeover of Credit Suisse and called on UBS to keep job cuts to an “absolute minimum”.

* The deal includes 100 billion Swiss francs ($A160 billion) in liquidity assistance for UBS and Credit Suisse from the Swiss central bank.

* The European Central Bank said on Sunday a Swiss rescue of Credit Suisse was “instrumental” in restoring calm to financial markets but it remained ready to support eurozone banks with loans if needed.

* UBS Chairman Colm Kelleher said the bank wants to keep Credit Suisse’s Swiss unit, speaking at a news conference announcing the merger between Switzerland’s two biggest banks on Sunday. “It is a fine asset that we are very determined to keep and hopefully service their customers and clients as efficiently as Credit Suisse has done,” Kelleher said.

MARKET REACTION

* Standard Chartered Plc and HSBC shares each fell more than six per cent in Hong Kong on Monday to more than two-month lows. The MSCI index for financial stocks in Asia ex-Japan was down 1.3 per cent.

* Safe-haven currencies the yen and US dollar recovered from early steep declines and the risk-sensitive Australian and New Zealand dollars flipped to losses.

QUOTES

MAX GEORGIOU, ANALYST, THIRD BRIDGE, LONDON:

“Today is one of the most significant days in European banking since 2008, with far-reaching repercussions for the industry. These events could alter the course of not only European banking but also the wealth management industry more generally.”

OCTAVIO MARENZI, CEO, OPIMAS, VIENNA

“Switzerland’s standing as a financial centre is shattered – the country will now be viewed as a financial banana republic. The Credit Suisse debacle will have serious ramifications for other Swiss financial institutions. A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away.”

RELATED NEWS

* The US Federal Deposit Insurance Corp (FDIC) is planning to relaunch the sale process for Silicon Valley Bank after failing to attract buyers in its latest auction, with the regulator seeking a potential break-up of the failed lender, according to people familiar with the matter. One of the options under consideration by the regulator is a sale process for the private bank of SVB for which bids are due on Wednesday, according to one of the sources, who requested anonymity as these discussions are confidential.

* Four prominent US lawmakers on banking matters said on Sunday they would consider whether a higher federal insurance limit on bank deposits was needed to stem a financial crisis marked by a drain of large, uninsured deposits away from smaller and regional banks. “I think that lifting the FDIC insurance cap is a good move,” Senator Elizabeth Warren, a Democrat, said on CBS’s Face The Nation program, referring to the Federal Deposit Insurance Corporation’s current $US250,000 ($A371,506) limit per depositor.