MON, MAR 20, 2023

MORNING SQUAWK

1. Swiss rollup

Swiss banking giant UBS agreed to buy its struggling rival Credit Suisse for about $3.2 billion on Sunday, in what’s become the most dramatic development yet in the banking crisis that started earlier this month. While officials stressed that the takeover was a commercial solution to Credit Suisse’s escalating problems, and not a bailout, Swiss regulators and central bankers paved the way for the deal to happen and offered billions in backup. The Swiss central bank pledged more than $100 billion to support the acquisition, while the Swiss government offered about $10 billion in specific guarantees to limit risks for UBS. The combined UBS-Credit Suisse will have about $5 trillion in invested assets.

2. Not out of the woods

Another weekend, another bold move to calm jitters over whether this banking crisis will escalate. While UBS’ deal to buy Credit Suisse prompted an initial boost to U.S. stock futures, there’s still plenty of doubt about big regional banks in the United States. The Federal Reserve also joined with five other central banks – the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the extremely busy Swiss National Bank – in what appeared to be a preemptive move to ease liquidity concerns in global markets. The Fed’s policy-setting committee is also meeting this week. Investors won’t just be looking at whether the Fed will raise rates another quarter point or put its war on inflation on hold. They’ll also pay keen attention to how Chairman Jerome Powell will set the agenda for the coming months. Follow live market updates.

3. Next up for Signature and SVB

The two bank failures that kicked off the crisis continue to ripple through the U.S. financial system. Over the weekend, the FDIC said Flagstar Bank, a subsidiary of New York Community Bancorp, would take over large chunks of Signature Bank, including its 40 former branches, almost all of its depositions and a piece of its loan portfolio. About $60 billion in loans and $4 billion in assets would remain under receivership. As for Silicon Valley Bank, Reuters reported that the FDIC planned to relaunch an auction process for what’s left of the company, seeking a possible breakup.

4. First Republic hit with another credit downgrade

First Republic shares took another hit Monday morning following another downgrade from Standard & Poor’s, which had already lowered the bank’s credit status to junk. After the failures of Silicon Valley Bank and Signature Bank, investors are focusing on First Republic as the main representative of large regional banks in the U.S. First Republic’s stock had already fallen about 80% this month heading into Monday trading. The S&P downgrade came after 11 banks, including JPMorgan Chase and PNC, agreed to deposit a collective $30 billion in First Republic as a sign of confidence.

5. Xi visits Moscow

Chinese President Xi Jinping landed in Russia on Monday for meetings with his Russian counterpart, Vladimir Putin. Xi’s three-day visit to Moscow is a show of unity between the two nations at a tense time for geopolitics. Russia’s invasion of Ukraine is now it in its secord year, as the U.S. and other Western nations fund and support the Ukrainian defense. China and the U.S., likewise, are at odds over trade and other tech policy, as well as the status of Taiwan, which China claims as its own. Xi’s visit also comes days after Putin’s trip to Russian-occupied Mariupol in Ukraine. Follow live war updates.

— CNBC’s Mike Calia wrote this newsletter. Ashley Capoot, Katrina Bishop, Hakyung Kim, Jeff Cox, John Melloy and Holly Ellyatt contributed.

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