UBS set buy Credit Suisse for nearly $3.25 Billion

Banking giant UBS is buying troubled rival Credit Suisse for almost USD 3.25 billion, in a deal orchestrated by regulators in an effort to avoid further market-shaking turmoil in the global banking system.

Swiss authorities pushed for UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs (USD 54 billion) failed to reassure investors and the bank's customers.

Following news of the Swiss deal, the world's central banks announced coordinated financial moves to stabilize banks in the coming week. This includes daily access to a lending facility for banks looking to borrow US dollars if they need them, a practice which widely used during the 2008 financial crisis. Three months after Lehman Brothers collapsed in September of 2008, such swap lines had been tapped for USD 580 billion.

As part of the deal, approximately 16 billion francs (USD 17.3 billion) in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. But these bonds are designed to be wiped out if a bank's capital falls below a certain level, which was triggered as part of this government-brokered deal.

Many of Credit Suisse's problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corp. and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.

The deal capped a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn't invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10%.