by Michael J de la Merced, Maureen Farrell and Andrew Ross Sorkin at New York Times
Switzerland’s largest bank, UBS, agreed on Sunday to buy its beleaguered and longtime rival Credit Suisse for about $3.2 billion, the most drastic bid yet to arrest the financial panic that has swept the globe over the past week.
The deal, hastily brokered over the course of a few days by the Swiss government, signifies the stunning fall of a 166-year-old institution that was once an emblem of Swiss pride. It is perhaps the most sweeping shake-up of the global banking sector since the 2008 financial crisis, when onetime financial giants were acquired by rivals to avoid catastrophic meltdowns.
Created in 1856 to finance Switzerland’s rail network, Credit Suisse ascended to the top echelons of finance, at times standing toe to toe with American titans like JPMorgan Chase.
But the bank, which is based in Zurich, was also tarred by decades of scandals, management upheavals and failed attempts at reform that damaged its reputation, attracted lawsuits and left it reeling from losses. The recent rout in banking stocks, spurred by the collapse of Silicon Valley Bank this month, brought its longstanding vulnerabilities into sharp relief and hastened its demise — highlighting just how panicked investors are.
“This is a historic day in Switzerland, but frankly, a day we hoped would not come,” Colm Kelleher, UBS’s chairman, told analysts on Sunday.
Swiss government leaders and regulators said on Sunday that the deal was the most effective way of reassuring investors about the health of the country’s financial sector and the possibility of its troubles spilling across its borders.
UBS’s takeover of Credit Suisse “has laid the foundation for greater stability both in Switzerland and internationally,” Karin Keller-Sutter, a member of the Swiss Federal Council, said at a news conference.
“We welcome the announcements by the Swiss authorities today to support financial stability,” Janet L. Yellen, the Treasury secretary, and Jerome H. Powell, the chair of the Federal Reserve, said in a joint statement.
Under the terms of the deal, UBS will pay 0.76 of one of its shares for each share of Credit Suisse, valuing it at about 3 billion Swiss francs, or $3.2 billion — a small fraction of its market value as of Friday.
To provide financial support to UBS to carry out the deal,…