Source – FT
The chaos engulfing crosstown rival Credit Suisse, which had become the basket case of European banking after three scandal-ridden years, was now in overdrive.
A day earlier, a SFr50bn ($54bn) liquidity backstop from the Swiss central bank had failed to arrest a crisis of confidence in the lender, whose shares had plunged after Ammar Al Khudairy, the chair of its largest investor Saudi National Bank, bluntly replied “absolutely not” when asked if it would put in any more money.
Global markets were already anxious after US regulators had seized control of Silicon Valley Bank following the withdrawal of $42bn of deposits in a single day. The same was happening at Credit Suisse. It was losing more than SFr10bn of wealthy clients’ money daily, adding to SFr111bn that had disappeared after a social-media rumour in October that it was on the verge of bankruptcy.
“For the biggest investor to say I’m not putting another dime in was a huge vote of non-confidence. I could argue that had he not said anything we might have been in a very different situation,” says a person close to Credit Suisse’s top management.
On Wednesday, the so-called “trinity” of the Swiss National Bank, regulator Finma and minister of finance summoned Credit Suisse chair Axel Lehmann, who was in Saudi Arabia for a conference, and chief executive Ulrich Körner for a call.
In the same meeting where they authorised the SFr50bn backstop, they also delivered another message: “You will merge with UBS and announce Sunday evening before Asia opens. This is not optional,” a person briefed on the conversation recalls.