UBS Group (UBSG.S) has announced that the official completion of its takeover of Credit Suisse (CSGN.S) is expected to take place as early as June 12, facilitated by the Swiss authorities in an effort to prevent a broader banking crisis.
The culmination of this merger signifies the end of an era for Credit Suisse, a financial institution with a rich 167-year history that has been marred by scandals and missteps, leading to a loss of customer trust and pushing the bank to the edge of collapse.
Let’s take a closer look at the key events leading up to this significant banking deal, which is the largest since the global financial crisis.
In February, Swiss regulators issued a strong reprimand to Credit Suisse for its mishandling of a multi-billion business deal involving now defunct financier Greensill, marking the third public rebuke the bank received in two years.
Moving into March, Credit Suisse faced a setback as the publication of its annual report was postponed due to concerns raised by the U.S. Securities and Exchange Commission (SEC) regarding its financial statements.
The situation worsened on March 13 when Credit Suisse shares plummeted to a record low, triggered by a widespread sell-off in the banking sector following the collapse of Silicon Valley Bank.
Subsequently, on March 19, an emergency rescue plan was announced, orchestrated by the Swiss government, central bank, and financial regulator.
Under this arrangement, UBS agreed to acquire Credit Suisse at a reduced price of 3 billion Swiss francs in stock and assumed potential losses of up to 5 billion francs.
UBS later disclosed that it was compelled to enter this deal hastily, despite its initial reluctance.
However, the rescue plan faced opposition, sparking a political backlash in Switzerland.
Parties from both the right and left expressed concerns over the significant risks associated with the merger and the size of the combined entity.
In response to the unfolding events, Swiss authorities imposed restrictions on bonus payments for Credit Suisse employees on March 21.
Shortly after, on March 23, Switzerland’s financial market regulator, FINMA, defended its decision to impose substantial losses on Credit Suisse bondholders, asserting the decision’s legal validity.
As April arrived, Switzerland’s federal prosecutor initiated an investigation into the merger.
Additionally, some holders of Credit Suisse AT1 bonds, which were rendered worthless by the merger, engaged lawyers to explore potential litigation to recover their losses.
During Credit Suisse’s final shareholder meeting on April 4, Chairman Axel Lehmann issued an apology to investors for pushing the bank to the brink of bankruptcy.
On April 5, the Swiss government directed Credit Suisse to either cancel or reduce all outstanding bonus payments for senior management.
Concurrently, UBS executives sought to reassure shareholders that the merger, despite its challenges, would ultimately succeed.
As May unfolded, UBS CEO Sergio Ermotti unveiled the new leadership team for the combined group on May 9. Drawing heavily from experienced UBS executives, the team retained only Credit Suisse CEO Ulrich Koerner, who had previously served at UBS.
Ermotti expressed his belief on May 12 that the situation at Credit Suisse had stabilized and expressed confidence that customer outflows had ceased.
May 16 saw UBS disclosing potential costs and benefits in the tens of billions of dollars resulting from the takeover of Credit Suisse, highlighting the high stakes involved.
The following day, the Swiss parliament’s upper house office decided to investigate Credit Suisse’s rescue through a special commission.
On May 23, the Swiss finance ministry issued an order to cancel or reduce the outstanding bonuses of Credit Suisse managers, implementing a decision announced in April.
On May 30, the Social Democratic Party of Switzerland presented a proposal to downsize UBS assets after the merger.
In June, UBS (UBSG.S) CEO Sergio Ermotti raised the prospect of difficult choices regarding job reductions as a result of the Credit Suisse takeover. Ermotti indicated that the finalization of the merger was imminent, and he dismissed apprehensions about the new bank’s potential size being excessive for Switzerland.
The CEO’s remarks came amid concerns that the enlarged institution presented significant risks to the country due to its magnitude and the perceived implicit guarantee from the government.
