Credit Suisse rescue saves UK banking industry

Credit Suisse, the 167-year-old Swiss bank, has been rescued by rival bank UBS in a deal backed by the Swiss government, aimed at avoiding a banking crisis. The rescue deal was struck after regulators worked round the clock to prevent the spread of fears that arose from the failure of two smaller US banks in recent weeks. Despite this, shares in European banks, including Deutsche Bank and UBS, fell, along with British banks, which saw their steepest falls in more than a year last week. However, experts predict that this will not lead to a repeat of the 2008 financial crisis.

The Swiss National Bank has stated that the Credit Suisse rescue deal is the best way to restore financial market confidence and manage risks to the economy. The deal, which was valued at just over $3.15bn, a fraction of its $8bn price tag on Friday, achieved its purpose of securing a result before the financial markets opened on Monday. Mark Yallop, the former UK chief executive of UBS, suggested that the takeover of Credit Suisse should reassure investors and stabilise the bank.

Six central banks, including the Bank of England, announced that they would boost the flow of US dollars through the global financial system in a bid to keep cash available. This move served as an “important backstop to ease strains in global funding markets” and alleviate pressure on banks. Switzerland’s central bank released a statement after the takeover, indicating that the deal protected the Swiss economy “in this exceptional situation”. Credit Suisse has been facing a string of problems in recent years, including money laundering charges, and was given an emergency $54bn lifeline from the Swiss National Bank on Wednesday to reassure markets.

Following the announcement of the deal, UBS Chairman Colm Kelleher stated that it was an “emergency rescue”, but was attractive to UBS shareholders. The investment banking part of Credit Suisse will be wound down, but it is too early to say what will happen to jobs, said Mr Kelleher. Credit Suisse has approximately 74,000 staff, with around 5,000 in the UK. The Bank of England welcomed the Swiss authorities’ comprehensive set of actions and stated that the UK banking system was “well capitalised and funded, and remains safe and sound”. Christine Lagarde, President of the European Central Bank, praised the Swiss authorities’ swift action, and the US Treasury Secretary and Federal Reserve Chairman both confirmed the resilience of the US banking system.