In an effort to calm the markets, UBS has agreed to purchase Credit Suisse

If losses are truly incurred on this portfolio, this will be activated. The federal government would cover the first 5 billion francs of losses in such scenario, followed by UBS and UBS would cover any additional losses, according to the government. Credit Suisse may have become “illiquid, even if it remained solvent,” according to the Swiss regulator FINMA, and it was imperative for the authorities to take action. After the Swiss government’s approval of UBS’ acquisition of Credit Suisse, FINMA announced that Credit Suisse Extra Tier 1 shares with a nominal value of about 16 billion Swiss francs ($17.2 billion) will be fully written down.

The biggest name caught up in the market turbulence caused by the recent failure of American lenders Silicon Valley Bank and Signature Bank is the 167-year-old Credit Suisse, which was forced to use $54 billion in central bank funding last week. The Swiss central bank declared that “a solution has been found to guarantee financial stability and defend the Swiss economy in this unique scenario” with the acquisition of Credit Suisse by UBS. Before the financial markets reopened on Monday, authorities were working feverishly to save one of the biggest asset managers in the world, Credit Suisse.Both Credit Suisse and UBS are among the 30 banks that regulators closely monitor on a global scale and whose failure would have an impact on the entire financial system.