UK ‘safe and sound’, insists Bank of England after emergency Credit Suisse deal

We'll have to wait until markets open on Monday to see if this deal has seen off further financial panic, as Shehab Khan reports

The financial system in the UK remains “safe and sound”, The Bank of England has insisted, in an effort to calm fears after the emergency sale of Credit Suisse to rival UBS.

The Swiss government, its national bank and financial regulator Finma brokered the deal to sell off the stricken lender, which employs 5,500 people in the UK.

Credit Suisse is designated by the international Financial Stability Board as one of the world’s systemically important banks and a collapse could have caused widespread market turmoil.

Swiss President Alain Berset said: “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

The bank has a UK base in Canary Wharf and all its UK businesses remain open, with customers able to access their deposits.

Credit Suisse said that under the terms of the deal UBS expressed its confidence that the employment of its staff will be continued.

The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market. Credit: AP

The Bank of England said: “We welcome the comprehensive set of actions set out by the Swiss authorities today in order to support financial stability.

“We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation.

“The UK banking system is well capitalised and funded, and remains safe and sound.”

But in a sign of global unease, the Bank – along with the Federal Reserve, the European Central Bank, the Bank of Canada, the Bank of Japan and the Swiss National Bank – took steps to enhance the provision of liquidity.

Seven-day maturity US dollar swap lines between the Fed and the other central banks will be increased from a weekly to a daily basis.

“The network of swap lines among these central banks is a set of available standing facilities and serves as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses,” the Bank of England said.

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Chancellor Jeremy Hunt said: “The UK government welcomes the steps taken today by the Swiss authorities in relation to Credit Suisse to support financial stability.

“The Bank of England has confirmed the UK banking system remains safe, sound and well capitalised.”

The Financial Conduct Authority said it was “minded to approve” the aspects of the UBS/Credit Suisse deal which fall under its remit in the UK.

The takeover of the 167-year-old Swiss bank follows the collapse of two large US lenders last week.

The turmoil in the global banking sector will mean Threadneedle Street will be under close scrutiny on Thursday when the Monetary Policy Committee decides whether to push interest rates even higher.