Central banks try to calm markets after UBS Takeover $3.2 Billion

By Stefania Spezzati, Oliver Hirt and John O’Donnell

(Reuters) -Some of the world’s largest central banks came together on Sunday to stop a banking crisis from spreading as Swiss authorities persuaded UBS Group AG on Sunday to buy rival Credit Suisse Group AG in a historic deal.

UBS will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse and assume up to $5.4 billion in losses in a deal backed by a massive Swiss guarantee and expected to close by the end of 2023.

Soon after the announcement late on Sunday, the U.S. Federal Reserve, European Central Bank and other major central banks came out with statements to reassure markets that have been walloped by a banking crisis that started with the collapse of two regional U.S. banks earlier this month.

S&P 500 and Nasdaq futures were each up 0.4%, both giving back some earlier gains. New Zealand dipped at the open and Australian shares opened with a 0.5% loss. The safe-haven dollar lost ground against Sterling and the euro but was up versus the yen.

Pressure on UBS helped seal Sunday’s deal.

“It’s a historic day in Switzerland, and a day frankly, we hoped, would not come,” UBS Chair Colm Kelleher told analysts on a conference call. “I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders,” Kelleher said.

UBS CEO Ralph Hamers said there were still many details to be worked through.

“I know that there must be still questions that we have not been able to answer,” he said. “And I understand that and I even want to apologize for it.”

In a global response not seen since the height of the pandemic, the Fed said it had joined with central banks in Canada, England, Japan, the EU and Switzerland in a coordinated action to enhance market liquidity. The ECB vowed to support euro zone banks with loans if needed, adding the Swiss rescue of Credit Suisse was “instrumental” for restoring calm.