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Credit Suisse under pressure to merge with UBS

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By Friday night, Credit Suisse had lost a quarter of its market value after big volatility in bank stocks this week.

Credit Suisse chief financial officer Dixit Joshi and his team will meet over the weekend to assess the bank’s strategic scenario, people familiar with the matter said on Friday.

The 167-year-old bank is the biggest name caught in the market turmoil unleashed by last week’s failure of US lender Silicon Valley Bank and its signatories, with the Swiss bank pulling $54 billion from the central bank.

Swiss regulators are encouraging UBS and Credit Suisse to merge to root out the crisis, but the regulators have no power to force a merger.

The boards of UBS and Credit Suisse were scheduled to meet separately over the weekend, according to the Financial Times. Credit Suisse and UBS declined to comment.

Long considered a symbol of banking stability, the mood in Switzerland has been languid as management grapples with the future of the country’s biggest lender. “Banks under constant stress” is the headline on the front page of the Neue Zürcher Zeitung.

At least four of Credit Suisse’s main rivals, including Societe Generale and Deutsche Bank, have imposed restrictions on transactions involving Credit Suisse or its securities.

“Swiss central bank intervention was a necessary step to defuse the situation, but it may not be enough to restore confidence in Credit Suisse,” said Frederick Carrier, head of investment strategy at RBC Wealth Management. and further measures are being discussed.”

Efforts were made to strengthen Credit Suisse as policymakers such as the European Central Bank and US President Joe Biden sought to reassure investors and depositors that the global banking system was secure. was broken. However, concerns persist about broader problems within the sector.

Credit Suisse and First Republic Bank

Already this week, big U.S. banks have provided a $30 billion lifeline to small lender First Republic, and U.S. banks have in recent days announced that the Federal Reserve (Fed) for a record $153 billion in emergency liquidity.

Rating agency Moody’s downgraded its outlook for the U.S. banking system to negative this week.

In Washington, the focus shifted to increased oversight to ensure that banks and their executives are held accountable. Mr. Biden called on Congress to give regulators greater powers, including raising fines, recovering funds, and barring officials from failed banks.

Some Democrats have called on regulators and the Justice Department to investigate Goldman Sachs’ role in the collapse of the SVB, according to Rep. Adam Schiff’s office.

Market troubles linger

Bank stocks have taken a beating around the world since the collapse of the Silicon Valley Bank, raising questions about other weaknesses in the financial system. US regional bank stocks plunged Friday, with the S&P Bank Index plummeting 21.5% after recording its worst two-week calendar loss since March 2020, when it rocked the market.

First Republic Bank closed Friday down 32.8%, taking its last 10 trading losses to more than 80%. While First Republic’s bankruptcy was averted this week with the help of some of the US banking giants, investors were surprised by disclosures about its cash position and urgent liquidity needs.

Interest rate risk

The SVB’s failure highlights the pressure on the banking sector from the relentless interest rate hike campaigns by the US Federal Reserve and other central banks.

Many analysts and regulators have attributed SVB’s downfall to its professional, technology-focused business model, but thanks to reforms adopted in the years following the global financial crisis, the broader banking system has become much more robust.

However, a senior central bank official said on Saturday that high-interest rates in major advanced economies could continue to cause problems for the financial system.

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