Twitter CEO Elon Musk says investment banking firm UBS will get a $100 billion emergency credit line as part of a $2 billion deal to buy rival Credit Suisse. expressed shock.
On Twitter, Musk responded to a tweet linking to an article reporting a deal between two financial institutions announced on March 19.
“So UBS buys Credit Suisse, shareholders get no voting rights, UBS gets a $100 billion line of credit from the central bank…,” said Twitter user Wall Street Silver. Posted next to the link. “It’s a crazy time this week. Band-aids are flying everywhere to keep the system from falling apart.”
“The $100 billion line… wow,” says SpaceX founder and Tesla CEO Musk answered.
UBSMore announced On Sunday, it acquired Credit Suisse, one of 30 financial institutions known as systemically important banks globally.
The move hopes to stave off financial market turmoil after the collapse of the 167-year-old global investment bank and the plunge in the Swiss lender’s share price.
Agreement “protects the Swiss economy”
Under the deal, brokered by the Swiss federal government, UBS will acquire Credit Suisse for approximately $3.23 billion. A Credit Suisse shareholder will receive one share of his UBS stock for every 22.48 shares of Credit Suisse stock he owns. This equates to CHF 0.76 per share. This is well below Credit Suisse’s March 17 closing price of CHF 1.86.
“With UBS’s takeover of Credit Suisse, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation,” said the Swiss National Bank (SNB). statement.
The SNB also said it would provide more than CHF 100 billion in liquidity to UBS to facilitate smooth trading.
“Furthermore, under the Federal Council’s emergency ordinance, Credit Suisse and UBS have acquired liquidity assistance loans with privileged creditor status in bankruptcy totaling up to CHF 100 billion ($108 billion). We can,” SNB said.
“Furthermore, under the Emergency Ordinance of the Federal Council, the SNB can grant Credit Suisse liquidity assistance loans of up to CHF 100 billion backed by federal default guarantees. It will be based on the Public Liquidity Backstop (PLB), the key parameters of which have already been decided by the Federal Council in 2022,” the bank added.
Sunday’s deal came days after Credit Suisse announced it had taken over the Swiss Central Bank with a loan offer of up to 50 billion Swiss francs ($53.7 billion).
Credit Suisse customer withdraws deposit
The bank said in a statement on March 16 that it would exercise its option to borrow up to CHF 50 billion from SNB. assets.
But the announcement of the new line of credit appeared to do little to assuage customer fears, and as depositors continued to withdraw funds, Credit Suisse’s share price plummeted and financial spillovers arose among government officials. A concern arose.
Credit Suisse has been in turmoil for 12 months after being hit with a number of scandals. These included the leak of documents that allegedly identified more than 18,000 accounts belonging to his foreign clients, including criminals, dictators and sanctioned political figures who hid money in Swiss companies. It was
The bank also suffered significant financial losses following the bankruptcies of US family office Archegos and supply chain finance firm Greensill.
Amidst stability concerns, customers of the Swiss banking giant withdrew a record amount of money in the fourth quarter, according to media releases (pdf). Banks reported net outflows of CHF 110.5 billion ($120.36 billion) in his three months to December 2022. This is up from net outflows of 12.9 billion ($14.05 billion) in the third quarter.
As a result, Credit Suisse assets fell from $1.2 trillion in Q3 2008 to $576 billion By the end of 2022, according to Bankrate.