UBS will take over Credit Suisse in a deal aimed at stemming what was fast becoming a global crisis of confidence.
Credit Suisse, the 167-year-old embattled lender had been brought to the brink of financial calamity last week, despite securing a $54bn (£44bn) credit line from Switzerland’s central bank.
The credit line was agreed in a move aimed at reassuring markets and depositors, but it failed to stem a rush of customer withdrawal, prompting a request from the Swiss government for the rival UBS to consider a takeover.
That takeover was announced on Sunday evening – UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.
The deal is expected to be closed by the end of this year.
Colm Kelleher, chairman of UBS Group, said the agreement “represents enormous opportunities”.
He also said that his bank’s long-term aim would be to downsize Credit Suisse’s investment banking business and align it with the “conservative risk culture” of UBS.
Axel Lehmann, chairman of Credit Suisse, described the day as “historic, sad and very challenging” for his bank and the global market.
‘The best available outcome’
Mr Lehmann said: “Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome.
“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”
In a statement, the Swiss central bank and other officials said that the agreement represented “a solution…to secure financial stability and protect the Swiss economy in this exceptional situation”.
It is also hoped that UBS’s takeover of its old rival will avoid the contagion of the kind seen in the financial crisis of 2008.
This is a significant deal but huge risks continue to lurk in the global financial system
This combination brings together not only Switzerland’s two biggest banks but two of the most significant financial institutions in the world.
There was reference during the press conference to discussions with Jeremy Hunt, the British chancellor.
That underlines the crucial nature of this deal as governments and financial regulators around the world race to contain the banking sector’s biggest crisis of the last 15 years.
This was always a deal that the Swiss government had resisted. It had been speculated so many times over the last decade, but the Swiss government had always wanted to maintain two national banking champions.
But let’s be clear – all the parties involved in this deal have effectively been strong-armed into it by the crisis of confidence which has erupted at Credit Suisse, and which has been fomenting for some time.
UBS has been effectively strong-armed into doing this deal by the Swiss government, and Credit Suisse has been forced to accept it – there won’t be a shareholder vote on the transaction.
The only alternative to this deal happening was going to be when financial markets opened on Monday in Asia and then in Europe, some form of nationalisation or resolution of Credit Suisse which would have deepened the sense of crisis in the industry.
This government-orchestrated rescue does avert the collapse of a major global bank but while it might be tempting to believe this draws a line under this banking crisis, remember that a week ago HSBC stepped in to buy the British arm of Silicon Valley Bank for £1 after its American parent collapsed, and a number of other mid-sized US banks have been forced to seek emergency support in the last 10 days.
All of this is a sobering reminder that as interest rates risk sharply to combat global inflationary pressures, huge risks continue to lurk in the global financial system.
Central banks insist systems are resilient
The news was welcomed by central banks in the US, Europe and in the UK.
All three insisted that banking systems within their jurisdiction are strong and resilient.
The Bank of England said: “We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation.
“The UK banking system is well capitalised and funded, and remains safe and sound.”
A deal likely to ripple through global markets
Credit Suisse is one of the world’s largest wealth managers and is also one of 30 banks ranked as systemically important, meaning the deal is likely to ripple through global markets on Monday.
It is also one of the largest investment banking employers in the City of London, employing around 5,000 people.
In a memo to employees on Sunday, Credit Suisse said there would be no immediate impact on clients or day-to-day working operations, adding that branches and global offices would remain open.
It comes after a difficult few weeks for the banking sector, with the collapse of US lenders Silicon Valley Bank and Signature Bank.
The UK branch of SVB was rescued by HSBC for £1, but a number of other mid-sized American lenders have also been forced to seek emergency funding.
Tesco Clubcard changes: Supermarket to cut value of rewards scheme
Tesco is cutting the value of its Clubcard rewards scheme, with customers no longer able to get triple their value when they cash them in with scheme partners.
The Tesco Clubcard reward partner scheme lets customers collect points while shopping and exchange them for vouchers for theme parks, restaurants and day trips.
Points used to be worth triple their value when they were exchanged – but from June will only be worth double.
The change will kick in on 14 June.
In a statement, Tesco said it was making the change “to make sure we can continue to provide a wide range of rewards that meet the needs of all our Tesco Clubcard members, while keeping prices low for everyone”.
But some Tesco customers expressed their outrage online given the context of the cost of living crisis.
One person tweeted: “Absolutely disgraceful from Tesco at a time when people are struggling enough with high prices and costs. More important to think of the profits I guess.”
The shops which could cost you an extra £800 a year
One Tesco customer said this could spell the end of their loyalty: “Main reason I hadn’t switched to Aldi or Lidl was because we use points for family meals out etc…one step closer to ditching Tesco now!”
Another was more measured in their response: “Card benefits used to be much, MUCH better – but still worthwhile.”
Tesco said it was extending the time period when partner rewards would be valid to 12 months, so any points cashed in for triple their value before 13 June can be used for a year.
In November, two million Tesco customers had Clubcard vouchers worth £13m that were due to expire.
If all those customers had cashed them in using the rewards scheme, the total savings would have totalled £39m.
MPs describe Stormont brake aspect of Windsor Framework as ‘practically useless’
A group of Eurosceptic MPs has described the Stormont brake – a key part of Rishi Sunak’s renegotiated Brexit deal – “practically useless”.
Mark Francois, chairman of the European Research Group (ERG), spoke after the group commissioned its “star chamber” of legal experts to pore over the Windsor Framework, the UK’s deal with the EU on post-Brexit arrangements when it comes to Northern Ireland.
Mr Francois said that among its initial findings were that EU law was “supreme” in Northern Ireland and that the rights of its people secured in the 1800 Act of Union had still not been restored.
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And in his harshest criticism, he said the Stormont brake – the mechanism that would allow a minority of politicians in Belfast to formally flag concerns about the imposition of new EU laws in Northern Ireland – was “practically useless”.
However, he said the ERG would meet again on Wednesday before deciding its approach to a Commons vote on the brake scheduled to take place on the same day.
The ERG’s criticisms of the Windsor Framework will be a blow to the prime minister, who had been hoping to secure widespread approval for his Brexit deal.
While Mr Sunak does not need the votes of the DUP and ERG to get the legislation through parliament, he will not want to rely on Labour’s approval and will be looking to limit the size of any potential Tory rebellion.
The ERG’s preliminary verdict comes as little surprise after the Democratic Unionist Party (DUP) confirmed it would vote against the Stormont brake in the Commons vote.
In a statement on Monday, DUP leader Sir Jeffrey Donaldson said while the Windsor Framework represented “significant progress” in addressing concerns with the Northern Ireland Protocol, it did not deal with some of the “fundamental problems at the heart of our current difficulties”.
Sir Jeffrey said the brake “is not designed for, and therefore cannot apply, to the EU law which is already in place and for which no consent has been given for its application”.
“Whilst representing real progress, the ‘brake’ does not deal with the fundamental issue which is the imposition of EU law by the protocol,” he added.
The NI protocol was agreed as part of Boris Johnson’s “oven ready” Brexit deal and was designed to prevent a hard border in the interests of preserving the peace secured in the Good Friday Agreement.
But the protocol has led to unhappiness in the DUP, who say it has created trade barriers between Great Britain and Northern Ireland and undermined its place in the UK.
Last February the DUP pulled out of the arrangement for devolved government in Northern Ireland in protest at the protocol, effectively leaving the region without government.
DUP and Tory MP to vote against key part of Windsor Framework over ‘fundamental problems’
MPs to debate ‘Stormont brake’ as key part of new Brexit deal comes to the Commons
The UK and Brussels agreed the Windsor Framework as a way to incentivise the return of power-sharing in Northern Ireland and to allay some of the key concerns of Unionists.
Under the agreement there will now be a green lane for goods that are destined for Northern Ireland will no longer be subject to time-consuming paperwork, checks and duties.
But Mr Francois said that the green lane “is not really a green lane at all”.
The prime minister’s official spokesperson said on Tuesday that the Windsor Agreement was a “good deal” for the people of Northern Ireland that went “significantly beyond” the previous protocol.
The spokesperson said the Stormont Brake was a “significant step change in what had previously been agreed” and that it had dealt with the “democratic deficit” flagged by the DUP, whereby EU laws apply in Northern Ireland without the influence of politicians in Stormont.
The Stormont Brake remains the “only avenue” to change Northern Ireland’s status as being automatically aligned to EU rules, they added.
“A vote against the brake, in factual terms, would lead to automatic alignment with the EU with no say at all,” the spokesman said.
Just Eat to axe around 1,700 delivery worker jobs
Delivery giant Just Eat has announced it is to axe 1,700 jobs as it ceases to employ its delivery riders and drivers.
Instead it will use gig economy workers to deliver food in the UK, as opposed to the hybrid system of employees and self-employed workers, despite strong comments by the chief executive against the gig economy.
A further 170 people working in Just Eat’s operational department are also impacted.
Delivery employees have been given six weeks’ notice with pay and it is understood office staff will begin a process of redundancy and may be moved to other parts of the business.
While the company could not provide Sky News with the number of delivery riders and drivers it uses in the UK, it did say employees were only a small part of overall delivery operations and only operated in certain parts of six UK cities.
The employment model was rolled out in London in December 2020 and Just Eat became the first food delivery aggregator in the UK to employ delivery people.
Company chief executive Jitse Groen said in February 2021 that the gig economy “has led to precarious working conditions across Europe, the worst seen in a hundred years”.
“The gig economy comes at the expense of society and workers themselves,” he wrote in the Financial Times while listing company plans to employ delivery workers.
Just Eat Takeaway.com said the employee model will continue in Europe.
However, delivery riders and drivers are not employed in all of the company’s European markets. None are employed in Slovakia and Ireland.
The job cuts come after the company saw a 9% slump in customer numbers last year as diners returned to pubs and restaurants.
“Just Eat UK is reorganising and simplifying its delivery operation as part of the ongoing goal of improving efficiency,” a spokesperson said.
“There will be no impact to the service provided to partners and customers.”
Just Eat Takeaway.com is the largest food online ordering and delivery service in Europe. It had been the largest outside China after the purchase of Grubhub in June 2020 but has since sold parts of the business.
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