The Bank of England will not object to UBS taking over fellow Swiss lender Credit Suisse amid a frantic race to prevent a repeat of the 2008 global banking crash, according to reports.
UBS has been in talks about a takeover of all or part of its compatriot as soon as this weekend.
The Swiss central bank’s $54 billion loan to Credit Suisse has failed to halt the slide in its share price which is down by 10 per cent.
Coupled with last week’s collapse of Silicon Valley Bank, whose UK arm had to be taken over by HSBC for the nominal sum of £1, the crisis engulfing Credit Suisse has fuelled anxiety about contagion in the international banking system.
The Financial Times said UBS could pay up to $1bn in a deal that would require the Swiss government to change the law to bypass a shareholder vote.
With UBS, Credit Suisse and the government are said to be keen to announce a takeover as soon as Sunday afternoon. Britain’s central bank has reportedly signalled its blessing for such a deal.
The Bank of England declined to comment on its position, which was first reported by Sky News.
Credit Suisse, which employs 5,000 people in the UK, is categorised by the global Financial Stability Board as one of just 30 “systemically important” lenders in the global banking system. Any deal may also result in significant job losses.
Two major banks in the US also collapsed in a turbulent week for the industry.
Mohammed El-Erian, chief economic advisor to German financial services firm Allianz, told the BBC: “This is not a voluntary action, this is a shotgun wedding and it’s being done in order to restore financial stability.
“Without it Credit Suisse may end up in a death spiral, in which it finds it much harder to undertake its banking activities.
“That could raise questions about other banks at a time when there are also banking concerns in the United States.”
Mr El-Erian said the current turmoil could lead to banks becoming more “risk averse” leading to a fall in credit availability.
