Credit Suisse’s problems took on new urgency this month after the collapse of Silicon Valley Bank spurred questions among investors about which bank would be the industry’s next weak link. Swiss authorities helped steer the deal with UBS this weekend after Credit Suisse suffered a sharp fall in its stock price last week and steep outflows from customers.
What is Credit Suisse?
Zurich-based Credit Suisse traces its history to 1856, when it was founded to finance the expansion of Swiss railroads. Until Sunday, it stood as Switzerland’s second-largest bank by assets, trailing UBS.
The bank’s main business was managing money and creating investment products for wealthy clients around the world. Recently, Credit Suisse had been working to spin off its investment-banking arm as part of an attempt to move on from a long stretch of scandals and quarterly losses.
Why did UBS agree to buy it?
UBS was pushed into the deal by regulators who were eager to curb further panic about the stability of the banking industry.
Last week, Credit Suisse became the latest bank to suffer a sharp decline in confidence, sending its stock and bond prices tumbling, and customers rushing to pull their money from the bank. The bank faced as much as $10 billion in customer outflows a day last week.
What caused the crisis at Credit Suisse?
Investors have been on high alert for signs of contagion following the rapid collapse of California-based Silicon Valley Bank earlier this month. That led to a selloff in shares of banks around the world, including Credit Suisse’s.
But problems for the Swiss lender turned particularly acute on Wednesday, when its largest shareholder, Saudi National Bank, said in a Bloomberg TV interview that it wasn’t considering adding to its investment due to regulatory rules. Saudi National Bank owns 9.9% of Credit Suisse. Capital requirements often prevent banks from holding more than 10% of other banks.
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