El-Erian: UBS acquisition of Credit Suisse most reasonable option

Egyptian-American economist Mohamed El-Erian, said that Union Bank of Switzerland’s (UBS) hasty deal to acquire its beleaguered rival Credit Suisse was not the best solution, but it was the most reasonable option out there, according to Bloomberg on Monday.

UBS and Credit Suisse deal worth three billion Swiss francs comes with government guarantees and liquidity provisions. The Swiss government is guaranteeing UBS will get up to 9 billion Swiss francs if they incur losses from certain assets.

El-Erian was referring to several other options for Credit Suisse — including nationalisation and winding up the business.

He continued, “The phrase ‘rescue’ has become such a terrible phrase that everyone avoids it. They do their best to say it’s not a bailout, but then they can’t explain why the money was used.”

El-Erian added that UBS shares and bonds may be under pressure with the start of trading this week, if the public sector’s support for the deal is limited to the $100 billion liquidity facility.