Bloomberg News reported on Sunday that Swiss authorities are considering nationalizing Credit Suisse bank completely or partially as the only viable option instead of UBS Group acquiring it.

Bloomberg said in its report that Switzerland is studying either acquiring Credit Suisse fully or owning a large stake in its shares if UBS fails to complete the acquisition process.

UBS, the largest bank in Switzerland, has shown readiness to acquire its competitor Credit Suisse but for a small part of its value, according to the Financial Times, while time is running out to avoid a disaster and a wave of panic in the markets on Monday.

According to the British daily, UBS is willing to pay only one billion dollars. But Credit Suisse rejected the offer with the support of its main shareholder, the Saudi National Bank, according to Bloomberg agency.

The proposed offer according to the newspaper states that the acquisition would be exclusively through buying shares at 25 cents per share, while the value of the share was 1.86 Swiss francs at market close on Friday, i.e., a total value slightly less than nine billion.

Negotiations began with the largest bank in Switzerland to complete the acquisition of its competitor Credit Suisse on Sunday, driven by the authorities, hoping to avoid a disaster and a contagious wave of panic in the markets on Monday.

Merging the country's two largest banks usually takes months, especially since one faces a complex crisis and increasing distrust among investors. But UBS is forced to complete the deal in a few days.

Pressure

Swiss authorities have no choice but to push UBS to overcome its hesitation, due to the immense pressure exerted by Switzerland’s main economic and financial partners who fear for their financial centers, according to Blake.

In this context, French Finance Minister Bruno Le Maire sent a clear message through the newspaper Le Parisien saying, "We are now awaiting a final and structural solution to the problems of this bank."

The same applies to the U.S. Treasury Department, which indicated that it is closely monitoring the issue.

The Swiss stock exchange opens at eight o’clock Greenwich Mean Time on Monday morning, and by that time, a solution must be reached for the bank, which is seen as a weak link in the sector.

When the stock market closed on Wednesday after a record drop, Credit Suisse’s value barely reached seven billion Swiss francs, constituting a default for a bank that is part — like UBS — of thirty institutions worldwide considered too big to fail.

But according to the Financial Times and Blake, the bank’s customers withdrew deposits worth 10 billion Swiss francs in one day late last week, a strong indicator of distrust in the institution.

General Guarantees

According to Bloomberg agency, UBS demands general guarantees to cover legal costs and potential losses that could reach billions of francs.

The agency pointed out that discussions are stalled regarding the investment bank, and one scenario under consideration is acquiring only the asset and wealth management and liquidating the bank’s investment division.

Also, discussions focus on the fate of Credit Suisse’s Swiss branch, which is one of the profitable companies within the group that lost 7.3 billion Swiss francs last year and expects to record "large" losses in 2023.

The branch provides banking services to individuals and small and medium enterprises. One suggested option by analysts is to offer it for public subscription, which would avoid mass layoffs in Switzerland.

On Wednesday, the Swiss National Bank lent 50 billion Swiss francs to rescue Credit Suisse and reassure the markets due to the lack of investor and partner confidence. However, the calm period did not last long.

Two Years of Scandals

Credit Suisse went through two years that witnessed a number of scandals that revealed "fundamental weaknesses... in internal control," based on the management’s own admission.

The market regulator (FINMA) accused it of "serious breach of its hedging obligations" through the bankruptcy of Greensill, which was an indicator of the beginning of its setbacks.

Meanwhile, UBS, which spent several years recovering from the shock of the 2008 financial crisis and the massive government bailout plan, had started to reap the fruits of its efforts. According to several media, the bank had no intention before the weekend to embark on the venture of acquiring Credit Suisse.

Faster and Stronger

In October, Credit Suisse revealed a wide restructuring plan involving the elimination of 9,000 jobs by 2025, i.e., more than 17 percent of its workforce.

The bank, which employed 52,000 people at the end of October, plans to separate investment banking from its other activities to refocus on more stable services, including wealth management.

But as Blake says, "Everything points to a Swiss solution this Sunday. And when the stock market opens on Monday, Credit Suisse may be a thing of the past."