EU, Asia bank shares slide despite UBS decision to buy out Crédit Suisse

The European financial system is "resilient" the European Central Bank said on Monday, as global bank shares and oil prices slumped following the announcement that Switzerland's biggest bank UBS will take over troubled rival Crédit Suisse.

"The European banking sector is resilient, with robust levels of capital and liquidity," the ECB said in a joint statement with the European Banking Authority and the EU's Single Resolution Board.

The institutions said they welcomed the actions taken by the Swiss authorities "to ensure financial stability".

Switzerland announced on Sunday that UBS would buy stricken lender Crédit Suisse for €3.04 billion, in a bid to prevent economic turmoil from spreading throughout the country and beyond.

But the deal failed to calm market nerves, with European banking shares plunging in early trading on Monday. Europe's main stock markets steadied overall.

Crédit Suisse opened almost 64 percent lower at 0.68 Swiss francs per share, well below the takeover price.

Shares in UBS also took a hit, falling almost nine percent.

France's central bank chief sought to distance European banks from the problems at Crédit Suisse and banking woes in the US.

Banking volatility in the United States does not concern French and European banks, François Villeroy de Galhau, a member of the European Central Bank's governing council, told France Inter radio on Monday.

He added that French banks were "very solid" and that "there are no problems."

He welcomed the takeover which he said would help guarantee "the stability of the whole financial system."

Remain vigilant

The decisions taken in Bern "are instrumental for restoring orderly market conditions and ensuring financial stability," said European Central Bank chief Christine Lagarde late Sunday.

"The euro area banking sector is resilient, with strong capital and liquidity positions."

On Monday, French Economy Minister Bruno Le Maire welcomed a "good deal" for stricken bank Crédit Suisse.

Talking to the BFM TV channel, Le Maire said "I'm delighted with this deal. It's a good deal" before adding: "At the same time, it's a heavyweight in Europe, so we will remain extremely vigilant about the reaction of the markets."

US Federal Reserve chair Jerome Powell and Treasury Secretary Janet Yellen said in a joint statement: "We welcome the announcements by the Swiss authorities today to support financial stability."

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The sentiment was echoed by British Finance Minister Jeremy Hunt.

The Fed and the central banks of Canada, Britain, Japan, the EU and Switzerland announced they would launch a coordinated effort Monday to improve banks' access to liquidity.

Swiss Finance Minister Karin Keller-Sutter said that bankruptcy for Crédit Suisse could have caused "huge collateral damage".

With the "risk of contagion" for other banks, including UBS itself, the takeover has "laid the foundation for greater stability both in Switzerland and internationally", she said.

Despite the news, Asian equities still fell in early trade Monday, with Hong Kong, Tokyo, Sydney, Seoul and Singapore all ending the session down.

(With AFP)