How the lowest banking merge affects the financial industry
It’s time to add Credit Suisse (CS) to the list of bank failures we’ve seen so far over the last few weeks. Over the weekend, UBS agreed to buy Credit Suisse with about $3.25 billion worth of UBS shares, and the Swiss government helped pay off some of CS’s upcoming loan portfolio write-offs. UBS had to intervene to save CS after last Wednesday a CHF50 billion liquidity injection from the Swiss National Bank proved insufficient to support the bank’s operations after the National Bank of Saudi Arabia (CS’s largest shareholder) said it no longer will provide assistance.
The way it all went down
Swiss banking giant Credit Suisse has revealed serious operational problems over the past few weeks, prompting the Swiss central bank and local financial regulator to intervene.
UBS responded to the intervention by agreeing to acquire Credit Suisse for $3.25 billion. Under the terms of the agreement, all Credit Suisse shareholders will receive 1 UBS share for 22.48 Credit Suisse shares.
The ailing bank will continue to operate as usual until the completion of the merger. In addition, the Swiss National Bank will provide it with access to funds that provide substantial additional liquidity.
Everything comes full circle: along the last financial crisis back in 2008, it was UBS that was saved by the long arm of the Swiss government. This time, the government needed UBS’s help.
The subsequent collapse of Silvergate Bank, Silicon Valley Bank, and Signature Bank created widespread fear among investors and raised concerns about Credit Suisse.
This was because the failure of Signature and SVB was a signal that the trouble could spread to very large banks. Credit Suisse was one of the largest financial institutions in the world.
Bitcoin to get stronger
In the meantime, the price of Bitcoin has been rising as banking crisis is hitting more and more traditional banking institutions. Bitcoin hit $28,500 for the first time since June 2022 after Credit Suisse announced the merger deal. Amid this global banking calamity, the price of bitcoin has exploded recently, up nearly 70% since the start of 2023.
Despite its lofty collateral desire to destroy finance, it was not cryptocurrencies that turned these banks upside down, and certainly not Credit Suisse. The bankers were so busy laughing at the collapse of the cryptocurrency that they did not realize that their banks were also collapsing.
Surprisingly, the Tron founder Justin Sun also showed a desire to buy the Crédit Suisse bank by offering $1.5 billion. He promised to integrate it into the Web3 universe, calling Switzerland one of the most cryptography-friendly destinations in the world.
Bitcoin seems to thrive on such occasions when some of the world’s largest banks are in deep trouble. After all, bitcoin was created during the last massive financial crisis caused by banks, many of which went bust and had to be bailed out again.
Blockchain and Neobanks stay by the clients’ side
While Bitcoin is getting stronger as an answer to the turbulence in traditional banking sector, banks show themselves as completely unready for internal and external changes. The whole Blockchain industry is watching the banking crisis from the outside, as banks don’t have problems with crypto, banks have problems with themselves and their system that needs to get disrupted.
What can clients and users do in the meantime? While following the latest market changes, we should all try to profit from all the positive and negative market changes that occur. Neobanks and digital currency services are definitely a good way to both diversify your portfolio and protect your funds.
The Quppy neobank remains untouched by the current crisis and is extending its services to give a hand to every existing and new client throughout these uncertain banking times. Quppy offers a wide range of fiat and crypto accounts, both centralized and decentralized so that users can safely store, buy, sell, and exchange digital and traditional money.