Credit Suisse, UBS deal: What you need to know

© Reuters. FILE PHOTO: A view shows logo of Swiss bank Credit Suisse in front of an office building in Zurich, Switzerland March 16, 2023. REUTERS/Denis Balibouse/File Photo

(Reuters) - Banking stocks and bonds plummeted on Monday as the hit to investors from UBS Group's state-backed takeover of Credit Suisse (SIX:CSGN) fanned concerns about the health of the global banking sector.

UBS agreed to buy rival bank Credit Suisse on Sunday for 3 billion Swiss francs ($3.23 billion) and assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities.

DEVELOPMENTS

* In a global response not seen since the height of the pandemic, the Fed said it had joined central banks in Canada, England, Japan, the EU and Switzerland in a co-ordinated action to enhance market liquidity.

* Switzerland awoke to a new era with a considerable dent in the country's long-held pride in its banking expertise.

* Credit Suisse told staff its wealth assets are operationally separate from UBS for now, but once they merged clients might want to consider moving some assets to another bank if concentration was a concern.

* The Swiss Bank Employees Association said it was "deeply shocked" by the takeover and called on UBS to keep job cuts to an "absolute minimum". Credit Suisse staff also fretted over the future amid "business as usual".

* Under the deal, 16 billion Swiss francs ($17 billion) of Credit Suisse's Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator.

* Euro zone banking supervisors tried to stop a rout in the market for convertible bank bonds, saying that owners of this type of debt would only suffer losses after shareholders have been wiped out.

* The takeover creates an enormous risk for Switzerland, Roger Nordmann, leader of the Social Democrats (SP) in the Swiss parliament, said.

MARKET REACTION

* Europe's bank shares fought back from an early slump on Monday and a cross-asset scramble for safety looked to have eased.

* Europe's bank bonds battered after Credit Suisse debt wipeout.

* Japan's yen rallied as investors sought out safe assets. Bitcoin climbed to a nine-month high as some investors turn to digital assets

* U.S. stock futures seesaw on bank worries, rate-hike pause hopes

ANALYSIS

* Credit Suisse rescue presents 'buyer beware' moment for bank bondholders

* UBS swallows doomed Credit Suisse, casting shadow over Switzerland

* Big money captivated by banking drama as investors brace for more turmoil

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* Four prominent U.S. lawmakers on banking matters said on Sunday they would consider whether a higher federal insurance limit on bank deposits was needed to stem a financial crisis marked by a drain of large, uninsured deposits away from smaller and regional banks.

* Did SVB break the Fed? Officials mull risks of more rate increases.