By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News, March 19, 2023
The largest bank in Switzerland will buy Credit Suisse, which has been in turmoil for several days, announced the Federal Council on Sunday. FINMA has approved the takeover. The transaction is valued at around CHF 3 billion.
UBS will pay one own share for 22.48 Credit Suisse shares.
The Swiss Confederation is also providing UBS with a CHF 9 billion guarantee to reduce risks.
The Swiss National Bank (SNB) has announced that it is “supporting UBS’s takeover of Credit Suisse by providing substantial liquidity support.” The two banks will be able to obtain an ADE of up to 100 billion francs.
UBS will pause its share buybacks, its chief financial officer said in a conference call with analysts. This is a conservative process because capitalization remains solid. The progressive cash dividend policy will be maintained, Chief Executive Ralph Hamers said. At the beginning of March, UBS said it would propose a new share buyback program at the April general meeting. Since the end of March 2022, a program has been underway to repurchase up to $6 billion worth of shares by 2024.
In a statement, the Swiss Trade Union Union accused Credit Suisse’s executives of having shown “gross incompetence” and of having “led the bank to disaster”. It also attacks the federal authorities and the SNB for “making the population believe that they have reduced the risks“.
“That we have reached this point is unbearable,” adds the USS, which calls for the establishment of “a task force to preserve a maximum of jobs and to develop a social plan in case of redundancies”. The union is also calling for “measures” to “avoid this kind of event in the future”.
The Swiss National Bank, the Bank of England, the Bank of Canada, the European Central Bank, the Bank of Japan and the US Federal Reserve have decided to strengthen “swap lines”, a mechanism that facilitates access to dollars for foreign central banks. These institutions will thus increase the frequency of transactions in dollars: “until now weekly, these operations will now be daily and will begin on Monday, March 20, 2023. They will continue at this rate at least until the end of April,” the statement said. The network of swap lines serves as a “liquidity safety net to ease tensions in international financing markets and thus help mitigate the effects of these tensions on the supply of loans to households and businesses,” the institutions recall.
In the United States, a coalition of midsize banks is calling on the government to insure all deposits for the next two years, in the wake of Silicon Valley Bank’s emergency rescue that insured all of the firm’s deposits regardless of size. They want to stop the exodus of deposits to big banks.
“Doing so will immediately halt the exodus of deposits from smaller banks, stabilize the banking sector and greatly reduce chances of more bank failures,” the Mid-Size Bank Coalition of America said in a letter to regulators.
Read also : How to invest in gold
The U.S. Federal Reserve had been quantitative tightening from $9 trillion to $8.3 trillion since March 2022, but last week added $300 billion to its balance sheet, to save the collapsing U.S. banks.
Gold price growth is back, jumped to $1,991 per troy ounce on March 17, gaining $137 over the past 30 days. Gold futures for June even crossed $2,000 on Friday.
The price of the yellow metal jumped to $1,951 per troy ounce on February 1st, and gold futures hit $ 1,965.
Gold price could cross $ 2,500 by June, silver price could hit $26 in 2023 amid persistent inflation and banking crisis in the U.S. and Europe.
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© Copyright 2023 – Swann Collins, investor, writer and consultant in international affairs.