HONG KONG -- The acquisition of Credit Suisse by compatriot UBS has dealt a fresh blow to Asian banks and investors already reeling from the collapse of Silicon Valley Bank in the U.S. earlier this month.

A rescue plan for Credit Suisse engineered by the Swiss financial regulator was announced just hours before the opening of trading in Asia on Monday, followed by a concerted action from six central banks to enhance U.S. dollar liquidity.

But terms of the rescue also include the write-off of Credit Suisse's Additional Tier 1 capital notes, also known as AT1 bonds. The decision, made by the Swiss Financial Market Supervisory Authority, will erase about 16 billion Swiss francs ($17.2 billion) in nominal value of AT1 bonds issued by Credit Suisse.

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The demise of banking giant Credit Suisse sent shockwaves through financial markets and appears to have dealt a blow to Switzerland’s reputation for stability, with one executive suggesting investors will now look at the mountainous central European country as “a financial banana republic.”

UBS, Switzerland’s largest bank, agreed on Sunday to buy its embattled domestic rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) as part of a government-backed, cut-price deal.


Swiss authorities and regulators helped to regulate the agreement, which came amid fears of contagion to the global banking system after two smaller U.S. banks collapsed in recent weeks.

The rescue deal means Switzerland, a country heavily dependent on finance for its economy, is on track to see its two biggest and best-known banks merge into just one financial giant.

“Switzerland’s standing as a financial centre is shattered,” Octavio Marenzi, CEO of Opimas, said in a research note. “The country will now be viewed as a financial banana republic.”