Swiss Prosecutors Probe UBS and Credit Suisse Merger

by Arnab Shome
  • The federal prosecutors are concerned about any criminal breaches.
  • The Swiss government backed the acquisition.
Switzerland

Switzerland’s federal prosecutors have opened an investigation against the rushed takeover of Credit Suisse by rival UBS for possible violations of the country’s criminal laws.

UBS Bought Credit Suisse in a 3B CHF Deal

On Sunday, the Swiss attorney general’s office confirmed its investigation into potential breaches by government officials, regulators, and executives at the two banks involved in merging the two massive banking institutions to avoid any financial meltdown.

The prosecutors have identified “numerous aspects of events around Credit Suisse” that warranted a probe and are now assessing for any “criminal offenses that could fall within [their] competence.”

“The Office of the Attorney General wants to proactively fulfill its mandate and responsibility to contribute to a clean Swiss financial center and has set up a monitoring system so that it can take action immediately on any issues that fall within its area of responsibility,” the office led by the attorney general of Switzerland, Stefan Blättler, stated.

However, Credit Suisse and UBS did not comment on the investigation.

A Rushed Deal

The CHF 3 billion (almost $3.25 billion) acquisition of Credit Suisse by UBS in mid-March was backed by the Swiss government. It was a raised deal as the share prices of Credit Suisse were falling with strong momentum, and the Swiss regulators were concerned about a banking crisis in the country following the collapse of three US banks in merely four days.

However, the acquisition deal angered the shareholders of both banks as their consent was not taken. The Swiss regulator had already greenlighted the deal as an emergency measure.

Credit Suisse is a major lender globally and is considered one of the 'too big to fail' banking institutions. Before allowing the acquisition, the Swiss central bank opened a CHF 50 billion (about $54 billion) credit facility to Credit Suisse to support the bank’s liquidity and investor confidence, but that did not help.

Now, the merger of Credit Suisse and UBS would create a mammoth banking institution with more than $5 trillion in total invested assets. Additionally, it will be the largest wealth manager, with the combined investment banking unit capturing about 25 percent of its risk-weighted assets.

However, the Swiss financial market regulator (FINMA) decided to write off $17 billion in Credit Suisse’s additional tier one (AT1) bonds, which are risky contingent convertible securities. This unexpected move created havoc in the global financial markets and even forced other European regulators to issue explanations of their stance on such AT1 bonds.

Meanwhile, UBS is reportedly preparing to reduce its workforce by 20 to 30 percent. However, there is no official confirmation of such a drastic move. Furthermore, UBS brought back its former CEO, Sergio Ermotti, to oversee the complex Credit Suisse acquisition.

GMO's new investment and Komainu enhances custody; read today's news nuggets here.

Switzerland’s federal prosecutors have opened an investigation against the rushed takeover of Credit Suisse by rival UBS for possible violations of the country’s criminal laws.

UBS Bought Credit Suisse in a 3B CHF Deal

On Sunday, the Swiss attorney general’s office confirmed its investigation into potential breaches by government officials, regulators, and executives at the two banks involved in merging the two massive banking institutions to avoid any financial meltdown.

The prosecutors have identified “numerous aspects of events around Credit Suisse” that warranted a probe and are now assessing for any “criminal offenses that could fall within [their] competence.”

“The Office of the Attorney General wants to proactively fulfill its mandate and responsibility to contribute to a clean Swiss financial center and has set up a monitoring system so that it can take action immediately on any issues that fall within its area of responsibility,” the office led by the attorney general of Switzerland, Stefan Blättler, stated.

However, Credit Suisse and UBS did not comment on the investigation.

A Rushed Deal

The CHF 3 billion (almost $3.25 billion) acquisition of Credit Suisse by UBS in mid-March was backed by the Swiss government. It was a raised deal as the share prices of Credit Suisse were falling with strong momentum, and the Swiss regulators were concerned about a banking crisis in the country following the collapse of three US banks in merely four days.

However, the acquisition deal angered the shareholders of both banks as their consent was not taken. The Swiss regulator had already greenlighted the deal as an emergency measure.

Credit Suisse is a major lender globally and is considered one of the 'too big to fail' banking institutions. Before allowing the acquisition, the Swiss central bank opened a CHF 50 billion (about $54 billion) credit facility to Credit Suisse to support the bank’s liquidity and investor confidence, but that did not help.

Now, the merger of Credit Suisse and UBS would create a mammoth banking institution with more than $5 trillion in total invested assets. Additionally, it will be the largest wealth manager, with the combined investment banking unit capturing about 25 percent of its risk-weighted assets.

However, the Swiss financial market regulator (FINMA) decided to write off $17 billion in Credit Suisse’s additional tier one (AT1) bonds, which are risky contingent convertible securities. This unexpected move created havoc in the global financial markets and even forced other European regulators to issue explanations of their stance on such AT1 bonds.

Meanwhile, UBS is reportedly preparing to reduce its workforce by 20 to 30 percent. However, there is no official confirmation of such a drastic move. Furthermore, UBS brought back its former CEO, Sergio Ermotti, to oversee the complex Credit Suisse acquisition.

GMO's new investment and Komainu enhances custody; read today's news nuggets here.

About the Author: Arnab Shome
Arnab Shome
  • 6306 Articles
  • 80 Followers
About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6306 Articles
  • 80 Followers

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