UBS is now ‘the world’s most secure financial institution’ for depositors as a result of Switzerland has made it too large to fail, analyst says

• UBS’ takeover of Credit score Suisse for $3.2 billion makes it a depositor protected haven, Jaret Seiberg mentioned.
• “The Swiss authorities have informed everyone that this factor is just too large to fail,” he informed CNBC.

UBS has turn out to be depositors’ most safe wager, TD Cowen’s Jaret Seiberg informed CNBC, after it agreed to take over Credit score Suisse on Sunday.

The financial institution is ready to accumulate its Swiss counterpart in a $3.2 billion acquisition deal. The federal government-backed association is an try to settle buyers’ anxiousness, after Credit score Suisse could not stem deposit outflows amid uncertainty about its liquidity and debt holdings.

“I feel proper now UBS must be the world’s most secure financial institution,” Seiberg mentioned Monday, referring to its depositors. “The Swiss authorities have informed everyone that this factor is just too large to fail.”

Collectively, UBS and Credit score Suisse will share round $5 trillion in belongings. US-listed shares of UBS had been up practically 4% on Monday. In the meantime, Credit score Suisse inventory continued to tumble, diving by over 60% as phrases of the all-stock takeover entailed a near-wipeout for shareholders.

The information additionally comes alongside one other financial institution acquisition over the weekend: Signature Financial institution, one of many two regional lenders seized by the Federal Deposit Insurance coverage Corp. over every week in the past, had additionally discovered a purchaser.

The third-largest financial institution failure after Silicon Valley Financial institution earlier than it, Signature will now be within the fingers of Flagstar Financial institution, which acquired all of its deposits and branches, in addition to a few of its loans.

The deal comes after the FDIC mentioned it should assure all deposits at Signature and SVB, even those who exceed its $250,000 restrict.

However Treasury Secretary Janet Yellen acknowledged to Congress on Thursday that, not like SVB and Signature Financial institution, not all deposits exceeding the $250,000 restrict will likely be assured sooner or later.

For now, financial institution income and web curiosity margins stay wholesome, Seiberg mentioned, and limitless deposit backstops characterize extra of a “break the glass emergency choice.”

“What we actually have is a disaster of confidence,” he added. “Limitless deposit insurance coverage is the ultimate act to revive confidence, however I am undecided it is wanted at the moment.”