ECB ready to help banks after frantic €3bn rescue of Credit Suisse by rival

The European Central Bank said it remains ready to support euro zone banks with loans if needed after the Swiss government brokered a rescue of Credit Suisse that will see it taken over by rival UBS.

UBS agreed to buy Credit Suisse for €3 billion on Sunday after a frantic weekend of negotiations involving the Swiss government and banking regulators as they looked to avoid a crisis spreading across global financial markets.

Switzerland’s largest bank was persuaded to raise the price being offered twice from an original €1 billion bid early on Sunday to €2 billion initially and finally to just over €3 billion, still a long way short of the market value of Credit Suisse when markets closed on Friday. UBS was also required to ease certain conditions and indemnities it wanted to attach to any deal.

Banking sources said regulators were determined to find a solution to a deepening crisis at Switzerland’s second largest lender, where former Bank of Ireland chief executive Francesca McDonagh was last year appointed chief operating officer, after a chaotic five days for the bank.

Irish banks face higher costs but appear insulated from wider Credit Suisse fallout, analysts say

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Normal requirements for shareholder approval of any such transaction will be waived by the Swiss federal council – the executive arm of government – under an emergency ordnance to ensure the swift closing of the transaction.

ECB president Christine Lagarde said on Sunday that the resolution of the Credit Suisse crisis was “instrumental” for restoring calm to the markets.

Investors have been concerned about the impact of Credit Suisse's debacle on euro zone banks despite the ECB's repeated reassurance that lenders in the 20 countries that share the euro are solid.

European banks are down by an average of 19 per cent over the past fortnight; US banks by 17 per cent. On Wednesday, Credit Suisse shares slumped by 30 per cent intraday, recovering only after central bank intervention before sliding again on Friday.

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Ms Lagarde repeated that euro zone banks were “resilient, with strong capital and liquidity positions” but said the central bank was ready to step in if necessary.

“Our policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy,” she said in a statement.

Ms Lagarde welcomed “the swift action and the decisions taken by the Swiss authorities”, which orchestrated Credit Suisse’s takeover by rival UBS.

“They are instrumental for restoring orderly market conditions and ensuring financial stability,” she said.

The integration of Credit Suisse into UBS will be overseen by Cork-born banker Colm Kelleher, who is chairman at UBS, alongside his chief executive Ralph Hamers. – Additional reporting: Reuters and The Financial Times Limited 2023