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UBS Claims It Was Hurried Into An Unfavourable Credit Suisse Rescue Merger

UBS Claims It Was Hurried Into An Unfavourable Credit Suisse Rescue Merger
A regulatory filing revealed that UBS Group AG was hurried into buying cross-town rival Credit Suisse Group AG in a merger it did not want, as a global bank crisis weakened the latter's solvency and prompted authorities to take rapid action.
In a report to the Securities and Exchange Commission on Tuesday, UBS told investors that owing to "emergency circumstances," it had less than four days to undertake due diligence.
It predicted a $17 billion damage from the takeover.
After a challenging year, Switzerland's largest bank agreed to acquire its smaller rival.
Credit Suisse's involvement in a succession of corporate failures frightened clients, who began withdrawing their funds, a trend that increased when bank failures in the United States fueled fears of a broader banking crisis.
The Swiss central bank offered Credit Suisse liquidity assistance on March 15 in response to a wave of deposit outflows and a significant decrease in share prices.
According to the UBS filing, the following day, UBS and Credit Suisse signed a confidentiality agreement, following which the former commenced due diligence.
The Swiss National Bank stated on March 19 that UBS will buy Credit Suisse for 3 billion Swiss francs ($3.4 billion) in equity and accept a loss of up to 5 billion francs from winding down a portion of the firm.
According to the document, the ultimate price was increased from an original 1 billion francs.
According to the statement, UBS's interest in acquiring Credit Suisse began in October, when the ad hoc Strategy Committee of its board of directors assessed its rival's distressed situation.
According to UBS, Credit Suisse was suffering deposit and net asset outflows at rates significantly higher than the July-September quarter.
UBS management conducted a preliminary study of the implications of a Credit Suisse acquisition in early December, which it delivered to the Strategy Committee on December 19.
In February, the Strategy Committee and board of directors both determined that an acquisition was "undesirable" and urged additional research to prepare for a scenario in which Credit Suisse was in such trouble that regulators asked UBS to step in.
UBS stated that from January to mid-March, it conducted financial assessments and analysed different legal frameworks and potential ways to resolve concerns, as well as any negative impact to itself, in the event that authorities requested an acquisition.
According to the UBS filing, Credit Suisse executives held discussions with the government about its alternatives, including a merger with UBS, from December until mid-January.

Christopher J. Mitchell

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