Early Monday trading saw losses throughout Europe’s Stoxx 600 led by Credit Suisse and UBS shares after the latter secured a 3 billion Swiss franc ($3.2 billion) “emergency rescue” of its embattled local rival.
At 3:55 p.m. Bangkok time, Credit Suisse shares plunged by 63%, while UBS lost 12%. The European banking index dropped by roughly 5% around the same period.
The drops came after the Swiss banking giant UBS agreed to acquire the rival Credit Suisse in a low-price merger to reduce the risk of a domino effect on the global financial system.
Swiss regulators took an important part in the transaction as governments sought to contain a financial crisis.
The Swiss National Bank said in a statement that the combination of the country’s two largest banks, UBS and Credit Suisse, was a solution to secure financial stability and protect the Swiss economy in this exceptional situation.
Credit Suisse’s scale and global influence, with its many overseas branches, were a concern for the banking industry. With over 530 billion Swiss francs at the end of last year, the 167-year-old bank’s balance sheet is roughly twice as large as Lehman Brothers’ when it collapsed.
UBS announced the merger late on Sunday, describing the resulting financial institution as “a sustainable value opportunity” with more than $5 trillion in total invested assets.
Colm Kelleher, chairman of the bank, said the purchase was “attractive” for UBS shareholders but that “as far as Credit Suisse is concerned, this is an emergency rescue.”
