Markets
Silicon Valley Bank Collapse Triggers Regional Banking Turmoil
The failure of Silicon Valley Bank on 10 March 2023 became the second-largest bank failure in US history and sent shockwaves through global financial markets.
Mergers & Acquisitions
Credit Suisse Acquired by UBS in Government-Brokered Emergency Rescue
On 19 March 2023, the Swiss government facilitated an emergency takeover of Credit Suisse by UBS, averting a disorderly collapse of the 167-year-old institution.
By Glen Elgin Editorial
On 19 March 2023, UBS agreed to acquire Credit Suisse in an emergency deal brokered by the Swiss Federal Department of Finance, the Swiss National Bank, and the Swiss Financial Market Supervisory Authority. The all-share deal valued Credit Suisse at approximately CHF 3 billion, a fraction of its pre-crisis valuation.
The rescue came after a turbulent week in which Credit Suisse's shares plummeted following the collapse of Silicon Valley Bank in the United States. Credit Suisse had already been weakened by years of scandals and losses, including the Archegos Capital Management implosion in 2021 and the Greensill Capital supply-chain fund collapse the same year.
As part of the deal, approximately CHF 16 billion of Credit Suisse's Additional Tier 1 (AT1) bonds were written down to zero, a move that stunned bond markets because it subordinated bondholders below shareholders in the loss-absorption hierarchy. This decision triggered legal challenges and prompted a broad repricing of bank AT1 debt across Europe.
The Swiss National Bank provided a liquidity facility of up to CHF 50 billion to support the transaction, and the Swiss government provided a CHF 9 billion guarantee against potential losses on the transferred assets.
The merger created one of the world's largest wealth management firms, with combined assets under management exceeding USD 5 trillion. For investors, the episode reinforced the importance of understanding the risk hierarchy of different financial instruments, particularly in the context of bank capital structures and the potential for regulatory intervention in times of stress.
Source: Bloomberg
This article is an original Glen Elgin Investments summary and analysis based on publicly reported facts. It does not reproduce the source article. Glen Elgin Investments is not the original publisher of the underlying news event.
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