- Despite $54billion lifeline from Swiss National Bank, Credit Suisse forced to sell
- Investor and client confidence plunged following string of scandals tied to bank
- Bank of England insists that UK’s market will be fine despite job loss fears
The Bank of England has rushed to put minds at ease by insisting that Britain’s banking system is ‘safe and ‘sound’ after Credit Suisse was dramatically rescued yesterday.
Switzerland’s second biggest lender was bought by rival UBS in a sensational shotgun wedding of two of Switzerland’s most established financial institutions.
The tie-up managed to avert an ‘unthinkable’ catastrophic collapse of Credit Suisse, which would have been the worst financial disaster since the 2008 banking crisis.
The Bank of England confirmed it had been ‘engaging closely with international counterparts’ before the takeover and vowed that the UK’s financial market will weather the storm. ‘The UK banking system is well capitalised and funded, and remains safe and sound,’ it said.
Although the Bank of England is trying to instil trust in the public, the takeover comes amid fears that thousands of jobs could be at risk in the UK.
The Swiss banks employ more than 11,000 staff in the City of London and Canary Wharf and heavy job losses are expected as a result of the merger.
As one of the world’s 30 ‘systemically important’ banks, Credit Suisse is considered large enough that its failure would lead to wider financial problems. Reports suggest last night’s bailout is thought to have cost $2billion (£1.64billion) – although some reports suggest it was as high as $2.6billion.
The deal capped a torrid week for Credit Suisse in which its shares fell by more than any time since the outbreak of Covid – even after being thrown a £45billion lifeline by the Swiss authorities.
The whole banking sector has been shaken by the collapse of US-based lenders Silicon Valley Bank, Silvergate and Signature Bank.
Alain Berset, President of the Swiss Confederation, said ‘unthinkable consequences for Switzerland and the world’ had Credit Suisse been allowed to fail, after it ‘lost the confidence of the market’
At a hastily arranged conference in Switzerland’s capital Bern last night, Mr Berset said: ‘Credit Suisse is one of two major banks in the country.
‘Its destiny is not only decisive for Switzerland’s businesses and its private customers and employees – but essential for the stability of the whole in financial sector.’
He said the bank had been a ‘source of concern’ for a few months and the tie up was the ‘best solution’ for restoring confidence to financial markets.
The final deal is believed to value Credit Suisse at up to £1.6billion, which is a fraction of its value at the end of last week.
It will also see Credit Suisse’s shareholders virtually wiped out. Talks were orchestrated by the Swiss National Bank and regulator Finma, with the Bank of England understood to have given its blessing to the deal.
Hargreaves Lansdown analyst Susannah Streeter said ‘markets will be calm’ following the deal.
‘There will be relief that the authorities are clearly ready to do what it takes to bring about stability,’ she said.
Christine Lagarde, president of the European Central Bank, said: ‘I welcome the swift action and the decisions taken by the Swiss authorities.
Source: DailyMail
