jonathan: live from new york city, welcome to the program. what a week for credit suisse. earlier this week, the ceo attempted to inspire confidence. >> we are executing, we have the right team, that's why we said in october, it needs to be changed. you can't come after two months and say why is not everything done? jonathan: only days later, the bank's top shareholder doing little to allay concerns. >> i'm wondering you would be open to assisting further if there was on their call for additional liquidity from credit suisse? >> the answer is absolutely not. outside the simplest reason -- we own nine point 8% of the bank. if we go above 10%, all kinds of new rules kick in. jonathan: following that, the stock started to sink. we got a major central-bank light lying. not enough to prevent credit

suisse coming into the weekend fighting for its future and it all ends like this. >> this solution is a takeover by ubs of credit suites. supporting it guaranteeing the framework conditions necessary for its exit. lisa: this is raising more questions than it answers. bill lee saying continued references by swiss authorities and bank executive to the u.s. banking turmoil raises concerns that intrinsic problems among swiss banks are not being addressed. there's a question of what the unknowns are at a time of so much speculation. jonathan: most people have come on this show the last few weeks, dare i say the last few years, pointing out the problems with credit suisse. used to talk about deutsche bank being the poster child of problems in europe. how can we sit there and say this is about what's happening on the others of the atlantic in the united states? lisa: some might argue it pushed

it to a threshold at a time people have been looking around wondering where a crisis in confidence could hit next. if you are wondering where a crisis of confidence could hit, credit suisse is a prime poster chio was no problem until there was. they said their capital buffers had not been breached. all the reassurances went out the window and we heard about some $10 billion in outflows on a daily basis last week as financial times reported earlier. jonathan: as we covered this story, tom has as well, said some to super talented individuals at this institution, it's going to be a difficult time for people to work at that bank and i get frustrated when we look at those headlines. there are some serious overlap between what ubs is taking on and what they are absorbing and i wonder what those numbers are going to look like through the next three to four years to fully absorb and integrate this institution? lisa: and how do they keep all

of those talented individuals that made the bank successful when it was successful? these are questions ubs as to work through wooded is dealing with bringing together the only major swiss bank now because it is one kind of banking town. but it is known for its financial system. jonathan: special coverage continues here on bloomberg tv and radio. if you are just tuning in, welcome to a special edition of bloomberg surveillance with lise and myself. ubs agreeing to buy credit suisse. think about friday where the market cap was -- 7.4 billion swiss francs. the deal, $3 billion. we got hammered over the last year on that stock and not enough to entice ubs. they had to come lower. here some other numbers -- from the swiss national bank -- offering a 100 billion frank assistance to ubs. and a bit of controversy -- this risky debt, the government

granting a 9 billion frank guarantee from losses ubs is taking on. we talked quickly this is happening. i understand from reporting the talks started on march 14 and then it got serious over the weekend when it felt like a deal eminently, immediately. ubs was clearly nervous about inheriting some legal and regulatory risks around this institution. is that number big enough? lisa: i think right now, what people are looking at is whether the 16 billion frank allotment of a t-1 door capital contingent bonds can absorb a lot of those losses. but it goes to this bigger question -- what did ubs see under the hood that made them raise the price and raise the guarantees, raise their threshold for what they were going to be ok with when they were speaking with swiss regulators? jonathan: joining us now is the

senior regulator at danske bank. has ubs got a bargain or take on a problem? >> [laughter] i think that's the million-dollar question at this point. the truth is there are too many unknowns to truthfully say anything about whether it's a bargain or whether they are overpaying. at least with the 81 right down we are seeing and a low share price compared to the market value by friday as well as the guarantees they got from the swiss government, i think they've got a lot of security cooked into this deal. i'm having a hard time seeing the bill turned into a disaster but there are a lot of things that i have had a hard time imagining that have happened so i would not call it a confident statement. lisa: given the fact ubs will be the loan major global banking institution of a nation known for its banking institutions, doesn't this have the guarantee of the entire swiss government

behind it? mark: are we talking about the 80 ones? lisa: ubs in particular? once it assumes the acquisition. mark: i'm not sure whether we are talking about the at1s or what we are talking about specifically. we have a lot of guarantees. they will have to take the lien's and losses from the legacy cases credit suisse has not popped up fully yet. they will have to take some of those losses but other than that, it seems like the swiss government will most likely be underwriting those risks. to a large degree, i agree with you that there should be a lot of margin of safety cooked in. we've got ubs bidding for more than what was the closing value of the stock on friday. lisa: as you look around at other european banks, are there

other vulnerable institutions, particularly in france that came under some selling pressure you are watching closely at the open tomorrow? mark: jonathan: mark: i mark: am mostly concerned about00 paying particular attention to those who suffered very little singularity to the credit suisse case. if we are looking beyond the noise and france, naturally, there is going to be some banks down there that have been heavily involved with some business with credit suisse during the years. having said that, i think there has been a long way leading up to the collapse we are seeing unfold of credit suisse right now. to the extent any bank had any meaningful exposure, they've had ample time to cover it and i would assume they have done so. for me, tomorrow will be about looking into how the market

absorbs this and looking into how the at1 market absorbs this. jonathan: a week ago, this was the trade in europe -- long on european banks. rates are going up, the economy is doing better. massive outperformance in that sector. what is the argument for that sector now? mark: i think that narrative has at least been put on hold and i think that will be for a long time until we restore some confidence in the european banking sector. i think this credit suisse case is in many ways quite unique. it's not like we didn't know there were going to be problems, that there were not challenges, but i see relatively little spillover directly, a lot of the tailwinds that have led us to

have a positive view on the outlook for european banks over the foreseeable future seem to have been put on a long pause and may be reversed altogether. jonathan: wonderful to hear from you. let's see how ubs trades tomorrow. and i'm not just talking but the equity, let's see how the whole universe of ubs securities trades tomorrow. lisa: the people i am talking with are watching the creditors -- credit default swaps which have been increasing. they want to understand when the price increases, is it to protect against a default? people are wondering if they've assumed the risk of credit suisse and the guarantees of swiss regulators, have they been enough to prevent that from happening? jonathan: let's assume this is a resolved issue. we need to talk about the ripples of the bank of the story and we need to discuss the unresolved issues on this side of the atlantic. it's only this week we had 11 banks band together and parked 30 billion positive -- there you

go, at first republic. we need to keep going back to this. friday at the close, that stock was down 33%, first republic. two mondays ago, it was a 120 three dollars stock. at the close on friday, it was $23. lisa: we have medium-sized banks begging the fbi see for a bit more reprieve to get some sort of insurance against the limits they have on depositors so they can go back and say even if you have $2 million in our bank, it will all be protected should we go under. not things you want to be saying to people. the larger point is these banks are probably seeing withdrawals. they are probably seeing deposits go to the major banks just like mohamed el-erian was saying. in that case, what is the case that are these banks suddenly sitting on billions more deposits? jonathan: how do you restore confidence without changing

policy? how do you resolve this issue? people believe there is a two-tier banking system and their deposits are safer in one place and not the other. how do you resolve that? lisa: a lot of people say the only way to resolve this is to tighten regulations on these medium-sized banks to make them more in tandem with the larger banks because how much is this a banking crisis and how much is this a banking regulation crisis, which is what we heard from terry haynes. he was putting together his thoughts and this was a failure of regulations that even flagged concerns as we see the reporting. at what point do they have to move on that before they can restore confidence? jonathan: coming up, chief global strategist, as we go toward the open in asia and as we go toward trading, looking forward to that from new york, this is bloomberg.

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>> people are doing something that is not rational bowl -- not rational but totally understandable. they're moving deposits. where they moving deposits out of question mark the smaller banks into larger banks and that dynamic is not going to stop

overnight. neither are the losses -- 17 billion in at1s, this is going to be pretty bumpy going forward. jonathan: we have been lucky to catch up with some guests, including mohamed el-erian. the news crossing the bloomberg moments ago, kailey leinz in d.c. what do you >> got? first republic downgraded again. from the plus to double b plus. it had just been cut to junk. the analyst at s&p referring to the $30 billion in deposits put into first republic i 11 larger banks. basically saying they don't think that is a long-term solution. meaningful deposits will be difficult. this does seem to be somewhat in line with the market after that risky was announced.

now there's a massive question about the future of this bank as it is one of those regional lenders that has struggled with deposit outflows. this is one we will be watching if it gets put into receivership or if it needs to be bought out by another bank similar to what we are seeing across the atlantic. jonathan: that line there is absolutely scathing -- brutal, attracting meaningful deposits will be difficult. lisa: this goes exactly to the question you just asked -- how do restore confidence in his banking system that is below the top tier of banks? that's a credit rating agency agonizing over that question and twice in a row in two weeks saying not looking good and still not looking good. jonathan: let's take a shot at the credit rating companies. these banks were ig. lisa: the banking industry runs

on trust. ultimately when you put your money in a bank, you can get it back out when you want it. when that trust is broken, how it does that spiral in a system that feeds on itself and that's what regulators are trying to stave off and asking the question is it enough? jonathan: if you are just tuning in, lisa and i have been talking about this for the last two hours. just the way this came to a deal -- first one billion, then to billions, you -- taking over credit suisse well below its market cap. joining us is the chief global strategist -- usually it is good morning or good evening on a sunday. do you feel more or less confident after this weekend? >> i think on friday, we were worried about what could come over the weekend.

lisa: in about 13 minutes, we will see the cash futures open for stocks. i wonder what you are watching for as markets open to understand the tenor of how this is being received. >> like you just said, the banking sector runs on confidence. we just need to see what the sentiment is. if you are going to see moves away from smaller banks, you will see something close to treasuries. this is about investors or anyone thinking about where it is safe? where are the safe havens? broad risk assets, wet happening in the european banking industry, how is this deal ruined confidence further or has that prompt -- hasn't propped it up? i don't think it has changed.

lisa: we were just talking with bob michele and he was saying he has brought forward his expectation for how quickly recession will take hold. what is your sense of what has changed? seema: we were negative coming into this year. we were expecting the recession to come in the second half of the year. we expect the fed to continue raising rates and keep them on hold for the remainder of the year. we have become more pessimistic. it does seem like recession potentially has come forward a little bit. in terms of fed tightening, i don't think they are going to go as far as we expected but the reason for fed tightening was to tighten financial conditions. whether the fed tightens or not, financial conditions will tighten from here. this banking crisis, the lending standard, this will have the same result whether it goes on wednesday or whether it doesn't go. jonathan: i'm not saying this is

a major crisis yet. i just want to reflect on the worst addressed crises in our history. whether it was draghi saying whatever it takes 10 years ago in 2012 or the federal reserve and the pandemic coming out and pledging to buy credit. both of them, the ecb, the federal reserve, turns out did not have the follow-through. they just had to say certain things. what needs to be said? what needs to be said that would change your mind on a less constructive view of this market? seema: this is a tough time because you run the risk of the fed or central banks coming out and saying some -- what kind of help they are going to provide. because they are of two minds about how this is going to pan out, they are inking this situation is worse than it actually is. maybe something about the insurance deposits, 250 k in the

u.s. would go some way to stemming a lot of the problems. i think at that moment, it is wait and see because we are not quite at the point where we can say this is going to be the next banking crisis. i think there is a window of opportunity and a lot of it is going to depend on regulators. we need to know, we are not going to unearth something in the next week or two. we are all saying three banks in the u.s. -- they are unique cases but credit suisse is unique as well. how many cases add up to contagion? that's what we need to see -- a couple of weeks of no nothing being unearthed. lisa: do you think on wednesday of fed chair jay powell raises rates by 25 basis points he will contribute to gaining confidence there is not another shoe to drop or do you think you will undermine whatever has been created?

seema: if he were to raise by 50 basis points, that would undermine confidence. going to 25 basis points seems like the right path at the stage. telling markets that yes, things are difficult but we are not overly concerned. we think we have the ability to contain financial instability and price stability. so much depends on what happens over the next two days, how does the market respond to the news we've got over the last four hours? we talk about data dependency, central banks are incredibly data-dependent. jonathan: thank you very much. i will go one further -- not just economic data with stock price of banks. lisa: what data are we going to get over the next couple of days? we will get the response of markets and how much are they going to say 25 or nothing? what kind of moral hazard does that raise? you are stripping out the supervisory function from the

controlling inflation function and you have to compromise the fighting inflation function to deal with situations and pitfalls. jonathan: people have lined up for 12 months saying the chairman of this fed does not want to be burned. he wants to be vulgar. we have asked who wants to be trichet and hike into a crisis? lisa: niall ferguson wrote a column talking about how he is not vulgar and has not had that same kind of consistency. he has also not seen inflation come down in the way vulgar was able to see it come down, so you can play both sides. it is such a difficult moment and hard to come up with a correct analog. jonathan: to break or not to break. that's the question. coming up, we will catch up with the senior advisor at bain capital private equity. in the next hour, we will talk about that in a moment.

jonathan: about five minutes from now, u.s. equity futures are going to open. we will get to that with you. as we come through this $3 billion deal, ubs, credit, what's the big question for you? lisa: the big question does stemming from the 16 billion francs of subordinated debt simply because it raises some

serious questions for 275 billion dollar market that has not been tested before. my other one is what did ubs see that we don't know to draw the hardlines that they did on this deal? jonathan: and how do you've value a bank at this moment -- there's a deal on sunday for $3 billion. lisa: what's your big question? jonathan: the u.s. side of things. it's easy to take shots at the europeans. what are they going to do on the insurance limits of deposits in america? lisa: it's easy to take pot shots in the u.s., also. jonathan: i built a career taking shots at europe. just trying to shift the focus. greg peters of pg i am next.

>> this solution is the takeover of credit suisse by ubs.