UBS buying rival Credit Suisse for nearly $3.2 billion to calm turmoil

GENEVA — Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion, in a deal orchestrated by regulators in an effort to avoid further market-shaking turmoil in the global banking system.

Swiss authorities pushed for UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to $54 billion failed to reassure investors and customers. Shares of Credit Suisse and other banks plunged last week after the failure of two banks in the U.S. sparked concerns about other potentially shaky institutions in the global financial system.

Credit Suisse is among the 30 financial institutions known as globally systemically important banks, and authorities worried about the fallout if it were to fail.

The deal was “one of great breadth for the stability of international finance,” said Swiss President Alain Berset as he announced the deal Sunday night. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

Switzerland’s executive branch, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without shareholder approval. Following news of the Swiss deal, the world’s central banks announced coordinated financial moves to stabilize banks in the coming week.

Colm Kelleher, the UBS chairman, hailed the “enormous opportunities” that emerge from the takeover, and highlighted his bank’s “conservative risk culture” — a subtle swipe at Credit Suisse’s reputation for more swashbuckling, aggressive gambles. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.

Swiss Finance Minister Karin Keller-sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”

The combination of the two biggest Swiss banks amounts to a thunderclap for Switzerland’s reputation as a global financial center — leaving it on the cusp of having a single national champion in banking.

UBS officials said they plan to sell off parts of Credit Suisse or reduce the bank’s size in the coming months and years.

Many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant federal rescue effort. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.