Credit Suisse shares plunged Monday after Swiss authorities cut a deal with its bigger rival UBS to acquire the troubled bank at a marked-down price.
after a central bank plan for Credit Suisse to borrow up to 50 billion francs last week failed to reassure investors and customers. Shares of Credit Suisse and other banks had tumbled last week after the failure of two banks in the U.S. raised questions about other potentially weak global financial institutions.
Tobias Straumann, an economic history professor at University of Zurich, said the merger was the right move because the U.S. bank collapses and the danger to Credit Suisse was"an international banking crisis in the making." "Containing crises is a bit like a game of whack-a-mole — with new fires starting as existing ones are extinguished," Shearing said.Credit Suisse is among 30 financial institutions known as globally systemically important banks, and authorities were worried about the fallout if it were to fail.
As part of the deal, approximately 16 billion francs in higher-risk Credit Suisse bonds will be wiped out, leaving investors with hefty losses. That has triggered concern about the market for those bonds and for other banks that hold them.
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