A bailout plan for Swiss banking giant Credit Suisse could inflict losses on its bondholders and even lead to the full or partial nationalization of Credit Suisse Group AG, as many reports published on March 19.
Swiss authorities are considering reimbursing Credit Suisse bondholders as part of the bank’s ongoing recovery efforts, two sources told Reuters. European regulators are concerned that the move could undermine investor confidence in Europe’s financial sector.
Another Bloomberg report claims that the Swiss government is considering a full or partial nationalization of the bank, which is the only alternative available if the UBS takeover is not completed. The investment bank UBS is the largest bank in Switzerland.
On March 18, the Swiss National Bank (SNB) and the Swiss financial regulator said that the acquisition of Credit Suisse by UBS was the “only option” to prevent a “collapse of confidence” in Credit Suisse.
Nationalization would have been an emergency option due to transaction complexity and time constraints. Swiss authorities are working on “emergency measures” over the weekend to speed up the deal before Asian markets reopen, including allowing the deal without a shareholder vote.
UBS is reportedly asking the government to take on about $6 billion in legal fees and potential future losses in the event of a takeover. UBS is offering $1 billion for Credit Suisse, a significant discount from the bank’s market value of nearly $8 billion as of March 17, according to Market Cap.
Swiss authorities are also concerned about job losses due to the deal. Credit Suisse was previously considering laying off 9,000 employees to save its business, according to reports.
Investment firm BlackRock on March 18 denied plans or interest in acquiring Credit Suisse. “BlackRock is not involved in, and has no interest in, any plans to acquire all or any portion of Credit Suisse,” the firm said in a Twitter post.