UBS AG is asking the Swiss government to cover about $US6 billion ($A9 billion) in costs if it were to buy Credit Suisse, a person with knowledge of the talks says, as the two sides race to hammer together a deal to restore confidence in the ailing Swiss bank.
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The 167-year-old Credit Suisse is the biggest name ensnared in the turmoil unleashed by the collapse of US lenders Silicon Valley Bank and Signature Bank in the past week, spurring a rout in banking stocks and prompting authorities to rush out extraordinary measures to keep banks afloat.
The $US6b in government guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, two people told Reuters.
One source cautioned the talks to resolve the crisis of confidence in Credit Suisse were encountering significant obstacles, and 10,000 jobs might have to be cut if the two banks combine.
Swiss regulators are racing to present a solution for Credit Suisse before markets open on Monday, but the complexities of combining two behemoths raises the prospect that talks will last well into Sunday, said the person, who asked to remain anonymous.
Credit Suisse, UBS and the Swiss government declined to comment.
The frenzied weekend negotiations comes after a brutal week for banking stocks and efforts in Europe and the US to shore up the sector.
US President Joe Biden's administration moved to backstop consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilise its shaky balance sheet.
UBS was under pressure from the Swiss authorities to carry out a takeover of its local rival to get the crisis under control, two people with knowledge of the matter said.
The plan could see Credit Suisse's Swiss business spun off.
Switzerland was preparing to use emergency measures to fast-track the deal, the Financial Times reported.
US authorities were involved, working with their Swiss counterparts to help broker a deal, Bloomberg News said.
British finance minister Jeremy Hunt and Bank of England governor Andrew Bailey are also in regular contact over the fate of Credit Suisse, a source familiar with the matter said.
Credit Suisse shares lost a quarter of their value in the past week. It was forced to tap $US54b in central bank funding as it tries to recover from a string of scandals that have undermined the confidence of investors and clients.
The company ranks among the world's largest wealth managers and is considered one of 30 global systemically important banks whose failure would ripple throughout the entire financial system.
The banking sector's fundamentals were stronger and the global systemic linkages were weaker than during the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a late Friday note to clients.
"However, a more forceful policy response is likely needed to bring some stability," Karoui said.
There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at buying some of its assets, while US financial giant BlackRock denied a report that it was involved in a rival bid for the bank.
The failure of California-based Silicon Valley Bank brought into focus how a relentless campaign of interest rate hikes by the US Federal Reserve and other central banks was pressuring the banking sector.
SVB and Signature's collapses are the second- and third-largest bank failures in US history behind the demise of Washington Mutual during the global financial crisis in 2008.
Australian Associated Press
