UBS agrees to buy Credit Suisse as regulators look to shore up global banking system

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UBS has agreed to buy its embattled rival Credit Suisse with Swiss regulators playing a key part in the deal as governments looked to stem a contagion threatening the global banking system.

«With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,» read a statement from the Swiss National Bank, which pledged a loan of up to 100 billion ($108 billion) Swiss francs to support the combination.

The UBS deal came after Credit Suisse shares logged their worst weekly decline since the onset of the coronavirus pandemic, despite an announcement that it would access a loan of up to 50 billion Swiss francs ($54 billion) from the Swiss central bank.

The takeover was facilitated by the Swiss government, the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank, the statement said.

Credit Suisse had already been battling a string of losses and scandals, and the last two weeks sentiment was rocked again as banks in the U.S. reeled from the collapse of Silicon Valley Bank and Signature Bank. U.S. regulators' backstop of uninsured deposits in the failed banks and the creation of a new funding facility for troubled financial institutions failed to stem the shock threatening to envelop more banks both in the U.S. and abroad.

Despite regulators' involvement in the pairing, the deal gives UBS autonomy to run the acquired assets as it sees fit, which could mean significant job cuts, sources told CNBC's David Faber.

Credit Suisse's scale and potential impact on the global economy is much greater than U.S. regional banks, pressuring Swiss regulators to find a way to bring the country's two largest