UBS Group emerged as Switzerland’s one and only global bank with a state-backed rescue of its smaller peer Credit Suisse, a risky bet that makes the Swiss economy more dependent on a single lender. | Reuters
Following the 2008 financial crash, politicians pledged to never bail out banks again. The Credit Suisse rescue, orchestrated with public money, shows banks’ continued vulnerability and how their problems can quickly rebound on their home country.
Holders of Credit Suisse’s Additional Tier 1 bonds will get wiped out and in a controversial move will come secondary to equity holders who will receive at least some UBS shares.It marks a radical twist of fate for the banks. During the great financial crash, it was UBS and not Credit Suisse that needed state support.
“In the past, when a deal between Credit Suisse and UBS was discussed, a sticking point would be concentration, especially in the domestic market,” said Morningstar’s Scholtz. “It is also the most stable part of the business, that generates quite a lot of cash. If UBS is not required to do an IPO of it, it could make sense for them to keep it, there are lots of synergies.”
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