Credit Suisse: Prosecutors probe USB
Image Source: DW
Swiss prosecutors are looking into the sudden takeover of Switzerland’s second-largest bank, Credit Suisse, by its rival, UBS.
People were worried about Credit Suisse’s finances, so the deal had to be done quickly last month.
On Sunday, Switzerland’s Federal Prosecutor said it would check to see if there were any “criminal offenses.”
Both Credit Suisse and UBS said that they did not have anything to say.
The Swiss government supported the deal for UBS to buy Credit Suisse. After the two banks and the country’s financial regulators talked about it over the weekend, the deal was made quickly.
At the time, the Swiss National Bank said the deal was the best way to restore confidence in the financial markets and keep economic risks under control.
People worried about the health of the global financial system after two smaller US banks failed. This made the markets shake.
When the deal was first announced, it was worth $3.15 billion (£2.6 billion), but it was worth about $8 billion on the Friday before the settlement.
But taxpayers and shareholders of both banks are upset about the deal because they didn’t get to vote on the takeover. Some have also said that it hurt Switzerland’s reputation as a financial center worldwide.
In a statement released on Sunday, Switzerland’s Federal Prosecutor said that “many parts of what happened with Credit Suisse” need to be looked into to see if any “criminal offenses” might have been committed.
It also said that calls had been made to “national and cantonal authorities” and that “investigation orders” had been given.
Separately, the Swiss newspaper Tages-Anzeiger reported on Sunday that the newly merged UBS-Credit Suisse bank was planning to cut its staff by 20–30%.
More than 120,000 people will work for the new bank worldwide. But the report said that about 11,000 jobs could be lost in Switzerland.
UK banking system ‘safe.’
The UK’s central bank said banks are “safe” after regulators agreed to a deal to help Credit Suisse. This was done to stop fears about banks from spreading.
On Sunday, rival UBS bought the bank in a deal backed by the Swiss government. Regulators worked all day and night to reach a deal.
It comes after two smaller US banks failed recently, making people worry about the world’s financial system.
Even though regulators did something on Sunday, bank stocks in Europe fell.
After gaining some ground, Deutsche Bank and UBS traded for 1.8% and 3.7% less.
Last week, British banks fell the most in more than a year and stayed in the red.
But experts don’t think there will be another financial crisis like the one in 2008 when the failure of some big banks led to a global recession.
The Swiss National Bank said the deal to save Credit Suisse was the best way to restore confidence in the financial markets and keep economic risks under control.
The last-minute deal put Credit Suisse’s value at just over $3.15 billion (£2.6 billion), much less than the $8 billion it was worth on Friday.
But the sale did what regulators wanted it to do: get a result before Monday’s opening of the financial markets.
Mark Yallop, who used to be in charge of UBS in the UK, said that the fact that UBS bought Credit Suisse “should” make investors feel better.
Mr. Yallop said that the sale of Credit Suisse should be looked at separately from the failure of two smaller US banks, which he said was caused by rising interest rates.
Six central banks, including the Bank of England, said they would increase the flow of US dollars through the global financial system to keep cash flowing through the global financial system.
The Bank of England, the European Central Bank, the Bank of Canada, the Bank of Japan, the US Federal Reserve, and the Swiss National Bank said the move was an “important backstop to ease strains in global funding markets” and take the pressure off banks.
How important is Credit Suisse
Credit Suisse is the latest and most important victim of a crisis of confidence that has already led to the failure of two mid-sized US banks and an emergency industry whip-round for another. But this is different. The second-largest bank in Switzerland was one of the 30 most significant banks in the world, so the Swiss government moved quickly to take it over.
Read Also: Credit Suisse investors fears heighten
Even though each failure has its reasons, the main reason is a sharp rise in interest rates worldwide. This has made safe investments that banks use to keep some of their money worth less. This has scared off investors, and the share prices of all banks have dropped, with the weakest banks taking the biggest hit.
The financial authorities in the EU, the US, and the UK all back this deal and say that banks are strong and people’s savings and deposits are safe.
When markets open, we’ll know if the Swiss rescue has calmed nerves in the financial sector. This is why getting this done as soon as possible was so important.