Credit Suisse is set for a $3.25 billion rescue by Swiss counterpart UBS.
The deal was agreed on Sunday ahead of the financial markets opening on Monday.
There are fears of another global financial crisis following the collapse of several banks in the United States. The demise of Silvergate Bank was followed by regulators taking over Signature Bank and Silicon Valley Bank.
The UK arm of the latter, a large-scale liquidity provider to the tech sector, was bought by HSBC for just £1 a week ago, with the UK government helping to broker the bidding process and bypass regulatory hurdles.
As concerns escalated over Credit Suisse leading up the weekend, the Swiss federal government stepped in to fast-track a deal by UBS. The government has granted a guarantee against potential losses worth $9.6bn, while the Swiss National Bank has committed to providing up to $110 billion in liquidity to UBS.
Significantly undercutting its $8bn market cap on Friday, Credit Suisse shareholders were not given the opportunity to vote on a deal which sees them receive one share in UBS for every 22.48 shares they own.
The combined businesses will have invested assets of more than $1.5 trillion.
In Crypto: Bitcoin surges amid fears of global banking crisis
“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue,” said UBS chairman Colm Kelleher.
“We have structured a transaction which will preserve the value left in the business while limiting our downside exposure. Acquiring Credit Suisse’s capabilities in wealth, asset management and Swiss universal banking will augment UBS’s strategy of growing its capital-light businesses.
“The transaction will bring benefits to clients and create long-term sustainable value for our investors.”
UBS CEO Ralph Hamers added: “The combination supports our growth ambitions in the Americas and Asia while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks.”
Meanwhile Signature Bank’s deposits and loans are now set to be sold to Flagstar Bank, a subsidiary of New York Community Bancorp. Other regional banks in the US are reportedly at risk of failure, leading to fears of hyperinflation.