Swiss President Alain Berset announced that UBS, Switzerland's largest bank, had paid 3 billion Swiss francs ( $3.2 billion) to acquire Credit Suisse in order to avoid additional dangers in the international banking market.
He called the decision "extremely important for the stability of world finance". Furthermore, he noted that the uncontrolled destruction of Credit Suisse would have incalculable consequences for the country and the global financial system. The agreement was approved by FINMA, the Swiss financial regulator.
In light of the merger of the two banks, the Swiss National Bank has agreed to increase UBS's liquidity by 100 billion francs ($108 billion) plus a loan of 50 billion Swiss francs ($54 billion).
The country's governing body has reportedly set up a legal aid system for Credit Suisse, allowing the merger to take place without the need for shareholder approval, and allocated additional liquidity loan guarantees to Swiss National Bank. Moreover, the authorities have allocated 9 billion Swiss francs, or about $10 billion, to UBS to compensate for losses that could arise as a result of the merger.
The merger of Switzerland's two biggest and best-known banks, which have a long history dating back to the mid-1800s, has hurt Switzerland's reputation as a global financial centre, leaving the country with only one major banking player.
The Financial Stability Board, the international organisation which monitors the global financial system, has included Credit Suisse in its list of systemically important banks in the world. This means that its collapse would have a significant impact on the whole economy, comparable to the collapse of Lehman Brothers fifteen years ago.
Christine Lagarde, president of the ECB, said that banks are in much better condition than during the 2008 financial crisis, thanks to stricter government regulation.
UBS executives have said they intend to sell part of Credit Suisse or reduce staff at the financial institution in the coming months and years.
