'A Day We Hoped Would Not Come': Competing Swiss Bank UBS Buys Credit Suisse Plus, New York Community Bank bought a large portion of another failed institution, Signature Bank. Here's the latest on the banking drama.
By Gabrielle Bienasz •
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As an embattled bank, Credit Suisse was something of a loose brick already, but over the weekend, the block went ahead and hit the floor.
UBS, a fellow Swiss-based bank, purchased its rival, Credit Suisse, on Sunday, per The New York Times.
"This is a historic day in Switzerland, but frankly, a day we hoped would not come," the chairman of UBS, Colm Kelleher said to analysts on Sunday, according to the outlet.
Credit Suisse was one of a few other banks, including U.S.-based Signature Bank, that faced financial problems as the panic and scrutiny generated by the collapse of Silicon Valley Bank earlier this month spread.
On Sunday, the Federal Deposit Insurance Corporation (FDIC) announced that a subsidiary of New York Community Bank would purchase "substantially all deposits and certain loan portfolios," of Signature Bank.
"The 40 former branches of Signature Bank will operate under New York Community Bancorp's Flagstar Bank, N.A., on Monday, March 20, 2023," the FDIC added.
The government organization assumed control of Signature Bank and SVB earlier this month. Signature experienced its own bank run, it said, after the SVB collapse.
Related: This 'Problem Child' Bank in Europe Is Triggering Anxiety About the Financial System, Again
Credit Suisse, however, had a different path to the weekend's events. The bank began in 1856 to help finance the expansion of railroads in Switzerland, according to the company's about page. It played in the big leagues with the likes of JPMorgan Chase and was once "an emblem of Swiss pride," according to the Times.
Its primary business was managing money for the super-rich. But the bank had a difficult time in the last decade or so, and had "long been," as the Wall Street Journal put it, "viewed as the problem child of the banking system."
In the last few years, the bank was caught in scandals including money laundering related to cocaine, fraud related to tuna, and a CEO who was spying on a former employee, per Reuters. In the fall, the bank said it expected a loss of about $1.6 billion as it shed clients.
Last week, in the wake of the SVB crisis, the bank experienced withdrawals in the billions, per the Times.
The deal that closed over the weekend meant that UBS, a competitor of Credit Suisse's, would buy the bank for $3.2 billion, with assistance from The Swiss National Bank.
In times of crisis, banking, consolidation can often occur, like in the wake of the 2008 recession, when JPMorgan Chase bought Washington Mutual and Bear Sterns, per Jeremy Kress, professor at the Ross School of Business at the University of Michigan.
As Andrew Ross Sorkin noted in DealBook, the collapse of SVB and the purchase of Credit Suisse have a "tangential" connection, minus the fact that the instability in the banking sector has contributed to wider anxiety in financial markets. This could mean more to come, the newsletter added.
Banks in the U.S. also banded together last week and put together a $30 billion package to rescue First Republic Bank, which also struggled after the SVB crisis.
