UBS acquires Credit Suisse for 3 billion Swiss francs, CoCo bonds reduced to zero.

Following a liquidity crisis triggered by the withdrawal of funding from its largest shareholder, the Saudi National Bank, Credit Suisse, Switzerland's second-largest bank, accepted a bailout of 50 billion Swiss francs from the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB) last week. To prevent the crisis from escalating further, the Swiss government intervened and facilitated a historic deal where UBS, Switzerland's largest bank, took over Credit Suisse for 3 billion Swiss francs, approximately 32.4 billion US dollars.

Background: Swiss National Bank to the rescue again! SNB bails out Credit Suisse crisis with over 50 billion US dollars

Equity Sold at Three-Quarters Discount, Coco Bonds Written Off

UBS and Credit Suisse are the two major banks in Switzerland, with almost equal market values in 2010. However, Credit Suisse is now swiftly packaged and sold to UBS for 3 billion Swiss francs, even significantly below last Friday's closing market value, approximately at the concept of a three-quarters discount auction.

According to Bloomberg, UBS is acquiring all of its shares, while the Swiss National Bank is providing UBS with 100 billion Swiss francs in liquidity support, and the government is providing 9 billion Swiss francs in guarantees to prevent potential losses from UBS taking over assets. The Swiss Financial Market Supervisory Authority FINMA stated that about 16 billion Swiss francs of Credit Suisse bonds will become worthless to ensure that private investors help bear the costs.

It is worth noting that this 16 billion Swiss francs of Credit Suisse bonds are commonly known as "Coco Bonds," Contingent Convertible Bonds, CoCo Bonds, a new type of bond that emerged after the European debt crisis. Essentially, they can convert between bonds and stocks; when a bank's capital level is too low, these CoCo bonds can be converted into equity, i.e., the bank's stocks. This time, all CoCo bonds are written off, indicating that the priority of bond claims is surprisingly lower than that of equity, completely overturning traditional financial thinking.

Exchange Agreements Among Six Central Banks

Due to recent bank failures in the United States, coupled with Credit Suisse's business expansion in up to 50 countries, this crisis has garnered attention from various countries. According to Bloomberg, U.S. authorities have been cooperating with Swiss regulators, and on Sunday, the Federal Reserve of the United States, along with the Swiss National Bank, Canada, the UK, Japan, and the European Central Bank, announced joint action to increase the frequency of dollar swap agreements from weekly to daily to enhance the global liquidity of the U.S. dollar.

In a joint statement, the Federal Reserve and the U.S. Treasury, along with other central banks, also welcomed the rescue plan for Credit Suisse. U.S. Treasury Secretary Yellen and Fed Chair Powell reiterated that U.S. banks have strong capital and liquidity and there are no issues.