Credit Suisse under pressure to merge with UBS, meets to weigh options

March 18 (Reuters) – Credit Suisse Group AG ( CSGNS S).

Credit Suisse Chief Financial Officer Dixit Joshi and his team will hold meetings over the weekend to assess the bank’s strategic situation, people familiar with the matter said on Friday.

The 167-year-old bank was one of the biggest names caught in the market turmoil unleashed last week by the collapse of US lenders Silicon Valley Bank and Signature Bank, forcing the Swiss bank to tap $54 billion in central bank funding.

Swiss regulators are encouraging UBS and Credit Suisse to merge, but neither bank wants to do so, a source said. Regulators do not have the power to force a merger, the person said.

The Financial Times said the boards of UBS and Credit Suisse are expected to meet separately later in the week.

Credit Suisse shares rose 9% in after-market trading following the FT report. Credit Suisse and UBS declined to comment.

In the latest sign of its mounting problems, at least four major banks, including Societe Generale SA ( SOGN.PA ) and Deutsche Bank AG ( DBKGn.DE ), have imposed restrictions on trading of Credit Suisse or its securities, involving five people. A person with direct knowledge of the matter told Reuters.

“The Swiss central bank is a necessary step to quell the flames, but it may not be enough to restore confidence in Credit Suisse, so there is talk of additional steps,” said Frederique Carrier, head of investment strategy at RBC Wealth Management.

The efforts to boost Credit Suisse come as policymakers including the European Central Bank and US President Joe Biden seek to reassure investors and depositors that the global banking system is safe. But fears persist of wider problems in the sector.

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Credit Suisse and First Republic Bank

Already this week, major U.S. banks have given smaller lender First Republic ( FRC.N ) a $30 billion lifeline, while U.S. banks have requested a total of $153 billion in emergency liquidity from the Federal Reserve in recent days.

This was driven by “funding and liquidity strains on banks, weakening depositor confidence,” said ratings agency Moody’s, which cut its outlook on the US banking system to negative this week.

In Washington, the focus was on greater oversight to ensure banks — and their executives — were held accountable.

Biden called on Congress to give regulators more power in the banking industry, including imposing higher fines, clawing back funds and blocking officials from failing banks.

Some Democratic lawmakers have asked regulators and the Justice Department to investigate Goldman Sachs’ ( GS.N ) role in SVB’s collapse, Rep. Adam Schiff’s office said.

Market problems persist

Bank stocks worldwide have suffered since the collapse of the Silicon Valley bank, raising questions about other weaknesses in the financial system.

U.S. regional bank stocks fell sharply on Friday and the S&P Banks Index (.SPXBK) fell 4.6%, bringing its decline over the past two weeks to 21.5%, its worst two-week calendar loss since the COVID-19 pandemic rocked markets in March 2020.

First Republic Bank fell 32.8% on Friday, bringing its losses over the past 10 sessions to more than 80%. Moody’s downgraded the bank’s credit rating after market close.

While support from some of the biggest names in U.S. banking has prevented Republic from collapsing since this week, investors were stunned by revelations about its cash position and how much emergency liquidity it needs.

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SVB Financial Group filed for a bankruptcy court-supervised reorganization just days after regulators took over its Silicon Valley bank unit.

Regulators have asked banks interested in buying SVB and Signature Bank to submit bids by Friday, people familiar with the matter said.

Regulators are considering retaining ownership of bonds owned by Signature and SVB, allowing smaller banks to participate in bids for failed lenders, a source familiar with the matter said.

Report by Reuters Bureaus; Written by Lincoln Feast; Editing: William Mallard

Our Standards: Thomson Reuters Trust Principles.

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