FRANKFURT, Germany — In a quote to ease chaos in the world monetary system, Swiss authorities crafted a strategy for the UBS bank to acquire its distressed smallersized competitor Credit Suisse at a marked-down rate.
It’s another immediate effort to battle worries that have put the monetary world on edge 15 years after the failure of U.S. financialinvestment bank Lehman Brothers pitched the international economy into a crisis.
Here are secret things to understand — and some things that aren’t yet understood — about the takeover and the larger market stressandanxiety sustained by bank failures in the U.S.
WHY IS UBS TAKING OVER CREDIT SUISSE?
Swiss authorities pressed UBS to take over its competitor after the rate of Credit Suisse shares plunged and depositors left, raising worries that it might stopworking.
Credit Suisse isn’t simply any bank. Unlike midsize Silicon Valley Bank, which went under earlier this month in the U.S., it is one of 30 banks categorized as internationally substantial since it might position a danger of larger difficulty if it collapses, as occurred with Lehman.
Credit Suisse’s problems pre-dated Silicon Valley’s failure, consistingof a $5.5 billion loss on its negotiations with personal financialinvestment company Archegos and a spying scandal.
Then worries about banks fed by the U.S. failures made financiers take a closer, less friendly appearance at banks. When Credit Suisse’s mostsignificant financier, Saudi National Bank, declined to put up more cash, financiers and depositors headed for the exits.
WILL THE TAKEOVER RESTORE CONFIDENCE IN THE GLOBAL FINANCIAL SYSTEM?
Confidence in banks is unstable ideal now. That stated, financialexperts, bank regulators and stock-market experts usually state that banks are in muchbetter shape than in 2008, with thicker monetary buffers versus losses and a variety of brand-new guidelines.
And this time, policymakers haveactually been quicker to respond. The U.S. Federal Reserve provided credit to banks that suffered uninsured losses on bond holdings due to increasing interest rates.
On Sunday, simply ahead of the opening of markets in Asia, other main banks signedupwith the Fed in broadening limitless dollar credit to any bank that requires it. That was a swift preemptive relocation utilized in earlier emergencysituations such as the pandemic market disaster of 2020.
Swiss authorities balked at lett