The illuminated logo of Swiss bank Credit Suisse is seen behind a clock at the banks headquarters at Paradeplatz in Zurich, Switzerland on Saturday, March 18, 2023. (Michael Buholzer/Keystone via AP) Illuminated windows are seen at the headquarters of Swiss bank Credit Suisse at Paradeplatz in Zurich, Switzerland, on Saturday, March 18, 2023. (Michael Buholzer/Keystone via AP) Axel Lehmann, Chairman Credit Suisse, speaks during a press conference in Bern, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. Sunday’s news conference by the Federal Council, the seven-member governing body that includes Berset, follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. (Peter Klaunzer/Keystone via AP) Colm Kelleher, Chairman UBS, left, and Swiss Finance Minister Karin Keller-Sutter during a press conference in Bern, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. Sunday’s news conference by the Federal Council, the seven-member governing body that includes Berset, follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. (Peter Klaunzer/Keystone via AP) Colm Kelleher, Chairman UBS, attends a press conference in Bern, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. Sunday’s news conference by the Federal Council, the seven-member governing body that includes Berset, follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. (Peter Klaunzer/Keystone via AP) The logos of the Swiss banks Credit Suisse and UBS are displayed at Paradeplatz in Zurich, Switzerland, Sunday March 19, 2023. (Michael Buholzer/Keystone via AP) A traffic light signals green in front of the logos of the Swiss banks Credit Suisse and UBS in Zurich, Switzerland, Sunday March 19, 2023. (Michael Buholzer/Keystone via AP) An aerial view of the headquarters of the Swiss banks Credit Suisse, center, and UBS, left, at Paradeplatz in Zurich, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. Sunday’s news conference by the Federal Council, the seven-member governing body that includes Berset, follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. (Michael Buholzer/Keystone via AP) Axel Lehmann, Chairman Credit Suisse, left, sits beside Colm Kelleher, Chairman UBS, during a press conference in Bern, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. Sunday’s news conference by the Federal Council, the seven-member governing body that includes Berset, follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. (Peter Klaunzer/Keystone via AP) Thomas J. Jordan, Chairman of the Governing Board of the Swiss National Bank, walks in front of the government building on his way to the Bernerhof, headquarters of the Federal Department of Finance FDF, on Sunday, 19 March 2023 in Bern. The Federal Council, the Swiss National Bank and representatives of banks were meeting at the Bernerhof to negotiate the rescue of Credit Suisse or a possible merger with UBS. (Peter Klaunzer/Keystone via AP) A general view shows the headquarters of the Swiss bank Credit Suisse, right, and UBS, left, at Paradeplatz in Zurich, Switzerland, Saturday, March 18, 2023. (Michael Buholzer/Keystone via AP) Axel Lehmann, Chairman Credit Suisse, left, and Colm Kelleher, Chairman UBS, shake hands beside Swiss Federal President Alain Berset and Swiss Finance Minister Karin Keller-Sutter, at the end of a press conference in Bern, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. (Peter Klaunzer/Keystone via AP) A stock ticker of the developments on the Credit Suisse stock exchange displayed in Zurich, Monday, March 20, 2023. The Swiss government on 19 March 2023 announced it was making way for UBS to take over Credit Suisse. (KEYSTONE/Ennio Leanza/Keystone via AP) Swiss Federal President Alain Berset, left, and Thomas J. Jordan, Chairman Swiss National Bank, right, shake hands beside Swiss Finance Minister Karin Keller-Sutter, at the end of a press conference in Bern, Switzerland, Sunday March 19, 2023. Banking giant UBS is acquiring its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday. (Peter Klaunzer/Keystone via AP) The logos of the Swiss banks Credit Suisse is seen at the banks headquarters entrance at Paradeplatz in Zurich, Switzerland, Sunday March 19, 2023. (Michael Buholzer/Keystone via AP)/Keystone via AP) The logo of the Swiss bank Credit Suisse is seen at the banks headquarters entrance at Paradeplatz in Zurich, Switzerland on Sunday March 19, 2023. (Michael Buholzer/Keystone via AP) Five to twelve "fuenf vor zwoelf" is written on a clock next to a logo of the Swiss bank Credit Suisse, in Zurich, Switzerland, Monday, March 20, 2023. Shares of Credit Suisse plunged 60.5% on Monday after banking giant UBS said it would buy its troubled Swiss rival for almost $3.25 billion in a deal orchestrated by regulators to try to stave off further turmoil in the global banking system. (Ennio Leanza/Keystone via AP) The logos of the Swiss banks UBS and Credit Suisse are displayed on different buildings in Geneva, Switzerland, Monday, March 20, 2023. Shares of Credit Suisse plunged 60.5% on Monday after banking giant UBS said it would buy its troubled Swiss rival for almost $3.25 billion in a deal orchestrated by regulators to try to stave off further turmoil in the global banking system. (Salvatore Di Nolfi/Keystone via AP)
LONDON (AP) — Credit Suisse shares plunged Monday after Swiss authorities cut a deal with its bigger rival UBS to acquire the troubled bank at a marked-down price. But European bank stocks and the wider market gained as investors watch whether moves to shore up banks will stem further upheaval in the global financial system.
Shares of Credit Suisse, whose woes stem from questions over its internal controls, closed nearly 56% lower a day after UBS said it would buy its fellow Swiss bank for a lowball price of 3 billion Swiss francs ($3.25 billion). The shares traded at about the level they are valued at in the deal.
Swiss regulators orchestrated the purchase in a bid to stop more turmoil after the collapse of two U.S. banks. In an indication of the frantic, behind-the-scenes deal-making to resolve the issue before markets opened, the acquisition was announced late Sunday.
There is still uncertainty over how the deal will play out for the combined lender and what comes next for the wider banking system. Analysts say some previous forced bank mergers didn’t work out well for shareholders in the long run.
It could be that no more banks get into trouble, but it’s also possible that “we just go from one weak institution falling over to the next,” said Vicky Redwood, senior economic adviser at Capital Economics.
There no other obvious candidates that could be singled out like Credit Suisse, but it’s “hard to predict where the problems will emerge,” she said.
UBS shares initially dropped on the Swiss stock exchange but closed up 1.3%. The deal whipsawed other European bank stocks, which tumbled before some clawed back their losses. Germany’s Deutsche Bank, France’s BNP Paribas and Italy’s UniCredit ended higher, while London-based Barclays sank 2.3%.
Swiss authorities urged UBS to take over its smaller rival after a central bank plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) last week failed to reassure investors and customers.
Many of Credit Suisse's problems were unique and unlike the weaknesses that brought down Silicon Valley Bank and Signature Bank in the U.S., including high interest rates. Those U.S. failures have raised questions about other potentially weak global financial institutions, sweeping up the already beleaguered Swiss bank.
Credit Suisse has faced an array of troubles in recent years, including bad bets on hedge funds, repeated shakeups of its top management and a spying scandal involving UBS.
Analysts and financial leaders say safeguards are stronger since the 2008 global financial crisis and that banks worldwide have plenty of available cash and support from central banks. But concerns about risks to the deal, losses for some investors and Credit Suisse's falling market value could renew fears about the health of banks.
Tobias Straumann, an economic history professor at University of Zurich, said the merger was the right move because the U.S. bank collapses and the danger to Credit Suisse was “an international banking crisis in the making.”
“Markets are very nervous, and I think an additional accident in Switzerland would have fueled a lot of problems,” he said.
Credit Suisse is among 30 financial institutions known as globally systemically important banks, and authorities were worried about the fallout if it were to fail.
UBS is bigger but Credit Suisse wields considerable influence, with $1.4 trillion assets under management. It has significant trading desks around the world, caters to the rich through its wealth management business, and is a major mergers and acquisitions adviser. However, Credit Suisse weathered the 2008 financial crisis without assistance, unlike UBS.
As part of the deal, approximately 16 billion francs ($17.3 billion) in higher-risk Credit Suisse bonds will be wiped out, leaving investors with hefty losses. Lawyers were already circling, eyeing possible legal action to get compensation for bondholders amid concern about the market for those bonds and other banks that hold them.
The combination of the two Swiss banks, each with histories dating to the mid-19th century, strikes at the country’s reputation as a global financial center — putting it on the cusp of having a single big national bank that would be too big to fail.
Some customers were caught off guard by the turmoil, at odds with Switzerland's reputation as as stable banking haven.
Sahil Dua, an Indian software engineer living in Zurich, holds a UBS account but opened one at Credit Suisse last Tuesday, the same day the lender flagged “material weaknesses” in internal financial controls that ultimately helped spark its downward spiral.
“My impression as a customer," Dua said, is “that at least these two banks were going to be fine, whatever happens.”
Dua said he wanted the credit card that came with the Credit Suisse account and that he considered switching over his primary bank account and bringing his savings from UBS. Not anymore.
He has a Credit Suisse account “with a balance of zero, and I’m glad that it’s still zero because I didn't add any money yet to it.” In the future, he plans to spread out his money in more than one bank.
“I will look into diversification more seriously now,” Dua said.
As the market tries to figure out what comes next after the merger, Straumann, the professor, said he wouldn’t be surprised to see problems for regional banks in Europe after further interest rate increases, much like what happened with midsized banks in U.S.
“The banking system of Europe has not fully recovered from the crisis” in 2008, he said. “It’s better, of course, than it used to be, but it’s vulnerable.”
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Associated Press writers Courtney Bonnell in London and David McHugh in Frankfurt, Germany, contributed.
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