Fears of another 2008-style banking crisis resurfaced this week after banking giant UBS swept in to buy its crisis-hit rival Credit Suisse and US authorities stepped in to broker a £24.7bn rescue package for the First Republic. What happened to Credit Suisse?
Stock markets have been jittery amid worries that isolated failures could widen to affect the global banking system, reviving bad memories of the financial crisis that plunged many Western economies into recession in 2008-09.
On Monday morning, shares in Credit Suisse dropped 61.95 percent in premarket trading in Zurich after rival UBS agreed at the weekend to take over the 167-year-old bank for £2.46 billion.
Credit Suisse shares were quoted at 0.61 Swiss francs (£0.54) in Julius Baer premarket trading, while those in UBS were down 4.73 percent at 15.81 francs.
Following the takeover, Britain’s FTSE 100 plunged by nearly a full percentage point in early morning trading on Monday. The FTSE 250 was also down 1 percent, with banking stocks across the two indexes slumping by 5.3 percent.
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“The next few hours of trading will give us a better picture of whether the crisis is contained,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said.
“In theory, there is no reason for the Credit Suisse crisis to extend, as what triggered the last quake for Credit Suisse was a confidence crisis which doesn’t concern UBS a bank outside of the turmoil, with, in addition, ample liquidity and guarantee from the SNB and the government.” SNB refers to the Swiss National Bank.
The Swiss Bank Employees Association demanded that UBS keep job cuts to an “absolute minimum”. “The jobs of very many employees are at stake,” it said, adding that it was in touch with the management.
