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The global bankers struggled to resist

Global stock markets fell sharply on March 20, after banking group UBS bought rival Credit Suisse in Switzerland.

According to the AP, in Asia, the Hang Seng (Hong Kong – China) index at one point dropped 3.3%, the Nikkei 225 (Japan) and the S&P-ASX 200 (Australia) both fell 1.4%, the Kospi fell 1.4%. (Korea) fell 0.7%… Meanwhile, DAX (Germany), CAC 40 (France) and S&P 500 (US)… also fell.

In the energy market, oil prices fell by more than $2 per barrel, while the euro, pound and AUD all appreciated against the dollar.

UBS will pay 3 billion Swiss francs (nearly 3.25 billion USD) to buy Credit Suisse and also lose up to 5.4 billion USD for its 167-year-old rival. Closing this “historic deal” needs the hands of the Swiss government after Credit Suisse’s plan to borrow 50 billion francs (nearly 54 billion USD) from the central bank failed to reassure investors and customers. .

Among the top 30 most important banks in the world, both the scale and potential impact of Credit Suisse on the global economy is far greater than the collapse of the US regional banks.

Follow the channel CNBCCredit Suisse’s balance sheet at the end of 2022 was about 530 billion francs, twice the size of Lehman Brothers’ when the US bank collapsed in 2008. Not to mention, Credit Suisse has extensive connections.

The global bankers struggled to resist - Photo 1.

A screen showing the Swiss Market Index (SMI) outside the UBS bank in Zurich on March 20 Photo: REUTERS

Therefore, the Swiss authorities had to put pressure to merge the two largest banks in the country – the total assets invested in the bank after the merger was 5 trillion USD, the combined assets account for 140% of Switzerland’s GDP. .

The Swiss National Bank pledged to lend up to 100 billion francs (about $108 billion) to support the acquisition, while the Swiss government provided a guarantee of 9 billion francs to “reduce risks for UBS”. According to the agreement, every 22.48 Credit Suisse shares can be exchanged for 1 UBS share.

Not long after the press conference announcing the agreement at the end of March 19 (local time), the US Federal Reserve (FED), the European Central Bank (ECB) and many other central banks simultaneously praised the Swiss response and reassured the market.

According to ReutersIn an unprecedented global response since the peak of the COVID-19 epidemic, the Fed said it was working with central banks in Canada, the UK, Japan, the European Union (EU) and Switzerland to strengthen liquidity. market account. If necessary, the ECB will lend to banks in the euro area.

In the US, the deposit situation was stable on March 19, according to Reuters. The Fed said that in the week to March 16, cash-strapped banks borrowed about $300 billion. Even so, tensions remain, despite many large banks agreeing to inject $30 billion to stabilize First Republic Bank.

While the US Federal Deposit Insurance Corporation (FDIC) plans to re-sell Silicon Valley Bank (SVB), New York Community Bank has agreed to buy a part of Signature Bank in a $2.7 billion deal. . The collapse of SVB and Signature recently rocked the banking system.

On March 20, Asian officials also spoke to ensure their banking system remained stable. The Hong Kong Monetary Authority (China) confirmed that Credit Suisse’s total assets here are about 100 billion HKD, accounting for less than 0.5% of the total assets of this special zone banking segment.

The Monetary Authority of Singapore (MAS) said that Credit Suisse’s operations in the island nation were normal and that the Singapore banking system was not affected. Similar are the reassurances of the central banks of Australia and Japan…according to CNBC.

Despite the above commitments, according to AP, the general sentiment of investors is still concerned. Credit Suisse shares at one point fell 63% in early trading on March 20 (local time), while UBS shares fell 14%.

In addition, under the agreement between UBS and Credit Suisse, Credit Suisse’s bonds of approximately 16 billion francs ($17.3 billion) will be “forsaken”. As such, some of Credit Suisse’s bondholders will be the party that suffers major losses.

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