In November 2017, Tidjane Thiam, the then-CEO of Credit Suisse, referred to Bitcoin as a bubble, questioning the cryptocurrency’s long-term prospects. Fast forward to March 2023, and Credit Suisse finds itself in financial turmoil, necessitating an emergency rescue by UBS.
In 2017, Thiam raised concerns about Bitcoin’s anonymity and the lack of appetite among banks to get involved with a currency that posed significant anti-money laundering challenges. At the time, Bitcoin had just surpassed the $7,000 mark for the first time, following a more than sevenfold increase in its value since the start of the year.
However, the tables have turned in the intervening years. On March 19, 2023, UBS announced its plan to acquire Credit Suisse in an emergency rescue, with the full support of the Swiss Federal Department of Finance, FINMA, and the Swiss National Bank. The combined business is expected to manage over USD 5 trillion in total invested assets and strengthen UBS’s position as the leading Swiss-based global wealth manager.
UBS Chairman Colm Kelleher described the acquisition as attractive for UBS shareholders but emphasized that it was an emergency rescue for Credit Suisse. The transaction aims to preserve the remaining value in Credit Suisse while limiting UBS’s downside exposure. The all-share transaction sees Credit Suisse shareholders receiving 1 UBS share for every 22.48 Credit Suisse shares held, amounting to a total consideration of CHF 3 billion. UBS will also benefit from CHF 25 billion of downside protection to cover marks, purchase price adjustments, restructuring costs, and additional 50% downside protection on non-core assets.
A press release issued by the Swiss National Bank revealed that both Credit Suisse and UBS have unrestricted access to the central bank’s existing facilities. Additionally, the banks can obtain liquidity assistance loans with privileged creditor status in bankruptcy for up to CHF 100 billion. Furthermore, credit Suisse can also access a liquidity assistance loan of up to CHF 100 billion backed by a federal default guarantee.
The irony of Credit Suisse’s situation is not lost on Bitcoin supporters. Despite Thiam’s skepticism back in 2017, Bitcoin has continued to gain traction and attract investment from various institutions, while the traditional banking sector, including Credit Suisse, faces its share of challenges.
As the financial landscape continues to evolve, the question remains whether Credit Suisse’s struggles are indicative of broader changes within the industry. Once dismissed by Thiam as a speculative bubble, Bitcoin has demonstrated its resilience and growing acceptance while the legacy banking system grapples with its own issues.
UBS’s acquisition of Credit Suisse underscores the financial sector’s volatility and rapidly changing nature, highlighting the importance of adapting to new technologies and trends, such as cryptocurrencies. As Bitcoin’s trajectory continues to confound skeptics, the story of Credit Suisse serves as a cautionary tale for those who may underestimate the impact of emerging financial innovations.
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