Photo/VCG

March 22 (NBD) -- UBS and Credit Suisse, two of the largest banking institutions in Switzerland, announced on Monday that UBS would acquire Credit Suisse at a price of 3 billion Swiss francs. This resolution avoided the further spread of panic in the global banking system.

Founded in 167 years ago, Credit Suisse lost its independence in just three days and was acquired by UBS with 1% of its peak stock price.

This transaction was all but inevitable for Credit Suisse. On last Thursday, Credit Suisse announced a support package from the Swiss National Bank of 50 billion Swiss francs and a buy-back of 3 billion US dollars in bonds, which was seen as a last-ditch effort to save the bank. In reality, however, its fate was already sealed, according to Financial Times. The SNB and the Swiss Financial Market Supervisory Authority made it clear that the package was meant to buy time for a sale of Credit Suisse, not to save it.

The negotiations between UBS and Credit Suisse were carried out mostly by intermediaries from the Swiss government and regulatory authorities, with very little direct communication between the two banks. The two banks had yet to meet face-to-face even as Sunday morning approached, although their offices were just across a parade square in Zurich.

Two of the three major shareholders were from Saudi Arabia and one from Qatar, and they were "extremely dissatisfied" with the lack of transparency in the negotiations, demanding "fair pricing and voting rights, as well as the removal of exit provisions", according to Financial Times.

The negotiations between UBS and Credit Suisse had started off "reasonably friendly" but had become increasingly hostile as time went on. By Friday night, Credit Suisse had lost 35 billion Swiss francs in customer deposits. Regulatory pressure from the US and France was extremely high, and US Treasury Secretary Mnuchin had called Keller-Sutter several times over the weekend, urging her to take swift and decisive action. The Swiss government threatened to remove the board of Credit Suisse if it did not sign the deal by Sunday, and UBS was ultimately forced to raise the offer to 3 billion Swiss francs, but in exchange, it secured more government support, including 100 billion Swiss francs in liquidity and a government backstop of up to 9 billion Swiss francs.