March 20 (Reuters) - Banking stocks and bonds plummeted on Monday as the hit to investors from UBS Group's state-backed takeover of Credit Suisse fanned concerns about the health of the global banking sector.
UBS (UBSG.S) agreed to buy rival bank Credit Suisse (CSGN.S) on Sunday for 3 billion Swiss francs ($3.23 billion) and assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities.
DEVELOPMENTS
* In a global response not seen since the height of the pandemic, the Fed said it had joined central banks in Canada, England, Japan, the EU and Switzerland in a co-ordinated action to enhance market liquidity.
* Switzerland awakes to a new era.
* Credit Suisse told staff its wealth assets are operationally separate from UBS for now, but once they merged clients might want to consider moving some assets to another bank if concentration was a concern.
* The Swiss Bank Employees Association said it was "deeply shocked" by the takeover and called on UBS to keep job cuts to an "absolute minimum". Credit Suisse staff also fretted over the future.
* Under the deal, 16 billion Swiss francs ($17 billion) of Credit Suisse's Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator.
* The takeover creates an enormous risk for Switzerland, Roger Nordmann, leader of the Social Democrats (SP) in the Swiss parliament, said.
MARKET REACTION
* Shares in UBS plunged, heading for their biggest one-day fall since 2008 on concerns about the long-term benefits of the deal and other European banking shares were battered.
* European share markets opened sharply lower and government bonds and gold rallied in a rush for safety.
* Prices of Additional Tier 1 (AT1) bonds from European banks fell sharply.
* Japan's yen rallied on Monday as investors sought out safe assets. Bitcoin climbed to a nine-month high as some investors turn to digital assets
* U.S. stock index futures fall
QUOTES
ROB CARNELL, ING REGIONAL HEAD OF RESEARCH, ASIS-PACIFIC:
"Early this morning, I thought that we might be looking at a small relief rally, a tentative one ahead of the Fed meeting (but) that doesn't seem to be what's going on at all. It seems we're still worrying about the financial sector."
OCTAVIO MARENZI, CEO, OPIMAS, VIENNA
"The Credit Suisse debacle will have serious ramifications for other Swiss financial institutions. A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away.
ANALYSIS
* Credit Suisse rescue presents 'buyer beware' moment for bank bondholders
* UBS swallows doomed Credit Suisse, casting shadow over Switzerland
* Big money captivated by banking drama as investors brace for more turmoil
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* Four prominent U.S. lawmakers on banking matters said on Sunday they would consider whether a higher federal insurance limit on bank deposits was needed to stem a financial crisis marked by a drain of large, uninsured deposits away from smaller and regional banks.
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