Explained: Why did UBS acquire Credit Suisse for nearly $3.25 billion? How does this affect the bank’s future?

Last week, the global banking world was rocked when stocks of Credit Suisse, the 167-year-old institution, fell to record lows and creating panic the world over. Now after a turbulent week, Switzerland’s largest bank, UBS, has agreed to buy longtime rival Credit Suisse for about $3.25 billion after emergency talks were held between the two banks and the country’s financial regulators. “It will also reinforce UBS’s position as the leading universal bank in Switzerland and further extend our position as the most important Swiss global bank.” UBS said in a statement: “The combination of the two businesses is expected to generate annual run-rate of cost reductions of more than $8 billion by 2027.” Axel Lehmann, Chairman Credit Suisse, speaks beside Colm Kelleher, Chairman UBS, during a press conference in Bern, Switzerland. Kelleher further said in the UBS statement, “This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue.” Explaining why the deal was important, Swiss president Alain Berset said, “Credit Suisse’ fate was not only decisive for Switzerland, for our companies, for private clients, for its own employees, but also for the stability of the entire financial system.” Echoing similar sentiments, Finance Minister Karin Keller-Sutter said the bankruptcy of Credit Suisse could have caused “irreparable economic turmoil”. “This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.” Also read: As US banking crisis and global recession gain momentum, India provides an exception to the scenario Reactions from global banking systems The deal was welcomed by other banks across the world, with the Bank of England saying it welcomed the “comprehensive set of actions” set out by the Swiss authorities.