UBS buys Credit Suisse to halt another Black Monday

Switzerland's biggest bank, UBS, has agreed to purchase the global investment bank Credit Suisse, which could have met the fate of Lehman Brothers. This acquisition helps prevent another global financial crisis, at least for the moment. Six major central banks, including the U.S. Federal Reserve, have joined forces in a coordinated action to enhance market liquidity.

During a media briefing on Sunday, the Swiss government and the Swiss National Bank (SNB) announced that UBS would be acquiring Credit Suisse with support from the Swiss government, the Swiss Financial Market Supervisory Authority. The SNB” UBS is paying 3 billion Swiss francs (4.23 trillion won) for Credit Suisse, and the SNB said it would provide a loan of up to 100 billion Swiss francs (141.7 trillion won) to UBS and Credit Suisse to boost liquidity.

After the announcement, six central banks of the U.S., Europe, the U.K., Swiss, Japan, and Canada issued a joint statement on their coordinated financial moves to enhance dollar liquidity by allowing “daily access to a lending facility for banks looking to borrow U.S. dollars if they need them.” This measure was widely used during the 2008 financial crisis when European banks struggled to obtain U.S. dollars.

However, market instability still persists. The KOSPI, which initially surpassed the 2,400 mark in Monday's trading session, lost 0.69% to close at 2,379.20 due to heightened concern following the Fed's policy rate decision. Japan's Nikkei (N225) fell 1.42%, while Hong Kong's Hang Seng Index dropped 3.01%.


Eun-A Cho achim@donga.com