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BERN, Switzerland — Banking giant UBS is buying its smaller rival Credit Suisse in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced on Sunday night.
Swiss president Alain Berset, who did not specify a value of the deal, called the announcement “one of great breadth for the stability of international finance. An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s globally systemic important banks. This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.
Sunday’s news conference follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. Still, global financial markets have been on edge since Credit Suisse’s share price began plummeting this week.
The 167-year-old Credit Suisse already received a $50 billion (54 million Swiss francs) loan from the Swiss National Bank, which briefly caused a rally in the bank’s stock price. Yet the move did not appear to be enough to stem an outflow of deposits, according to news reports.
Still, 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 rescue effortby the Federal Deposit Insurance Corporation and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.
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