Credit Suisse meets to consider options, under pressure to merge with UBS

March 18 (Reuters) – Credit Suisse Group AG ( CSGN.S ) kicked off a make-or-break weekend after some rivals grew cautious in their dealings with the bank as regulators urged it to pursue a deal with Swiss rival UBS AG (UBSG). S).

Credit Suisse Chief Financial Officer Dixit Joshi and his teams will hold meetings over the weekend to consider strategic scenarios for the bank, people with knowledge of the matter said on Friday.

The 167-year-old bank is the biggest name caught up in market turmoil sparked by the collapse of US lenders Silicon Valley Bank and Signature Bank in the past week, forcing the Swiss bank to use $54 billion in central bank funding.

Swiss regulators are urging UBS and Credit Suisse to merge, but neither bank wanted to do so, a source said. The regulators do not have the power to force the merger, the person said.

The boards of UBS and Credit Suisse were expected to meet separately over the weekend, the Financial Times said.

Credit Suisse shares rose 9% in aftermarket trading following the FT report. Credit Suisse and UBS declined to comment.

In the latest sign of the growing problems, at least four major banks, including Societe Generale SA ( SOGN.PA ) and Deutsche Bank AG ( DBKGn.DE ), have placed restrictions on their trades involving Credit Suisse or its securities, five people with direct knowledge of the matter told Reuters.

– The entry of the Swiss central bank was a necessary step to calm the flames, but it may not be sufficient to restore confidence in Credit Suisse, so there is talk of more measures, says Frederique Carrier, head of investment strategy at RBC Wealth Management.

The move to prop up Credit Suisse comes as policymakers including the European Central Bank and US President Joe Biden sought to reassure investors and depositors that the global banking system is safe. But fears of wider problems in the sector persist.

Already this week, major U.S. banks provided a $30 billion lifeline to smaller lender First Republic ( FRC.N ), while U.S. banks collectively sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

This reflected “funding and liquidity pressures on banks, driven by weakened depositor confidence,” said rating agency Moody’s, which this week downgraded the outlook for the US banking system to negative.

In Washington, the focus was on greater oversight to ensure that the banks – and their managers – are held accountable.

Biden called on Congress to give regulators more power over the banking sector, including imposing higher fines, revoking funds and barring officials from failed banks.

Some Democratic lawmakers asked regulators and the Justice Department to investigate the role of Goldman Sachs ( GS.N ) in SVB’s collapse, the office of Representative Adam Schiff said.

MARKET PROBLEMS THESE

Bank stocks globally have been vulnerable since the collapse of Silicon Valley Bank, raising questions about other weaknesses in the financial system.

U.S. regional bank stocks fell sharply on Friday and the S&P Banks Index (.SPXBK) fell 4.6%, bringing its decline over the past two weeks to 21.5%, the worst two-week calendar loss since the COVID-19 pandemic rocked the markets in March 2020.

First Republic Bank ended Friday down 32.8%, bringing its losses over the past 10 sessions to more than 80%. Moody’s downgraded the bank’s debt rating after the market closed.

While support from some of the biggest names in US banking prevented First Republic from collapsing this week, investors were surprised by revelations about its cash position and how much emergency liquidity it needed.

SVB Financial Group filed for bankruptcy-supervised reorganization, days after regulators took over its Silicon Valley Bank unit.

Regulators had asked banks interested in buying SVB and Signature Bank to submit bids by Friday, people familiar with the matter said.

Regulators are considering retaining ownership of securities owned by Signature and SVB to allow smaller banks to participate in auctions for the collapsed lenders, a source familiar with the matter said.

Reporting by Reuters agencies; Writing of Lincoln Feast; Editing by William Mallard

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