After a weekend of frantic talks, the Swiss government and the banking regulator brokered a deal once it became clear that a $54bn (£44bn) loan to Credit Suisse from the Swiss central bank had failed to halt the precipitous slide in its share price.
"The takeover of Credit Suisse by UBS is the best solution" in the current situation, said the Swiss president, Alain Berset.
He said the takeover was made possible after the Swiss federal government, the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank agreed to support the deal.
An £8bn insurance scheme to protect UBS from losses was described by Karin Keller-Sutter, the Swiss finance minister, as "like a backstop and insurance that only comes into effect if certain losses occur".
Private investors who supported Credit Suisse with $16bn of credit were also expected to be wiped out by the deal.
Coupled with last week's collapse of Silicon Valley Bank, whose UK arm had to be taken over by HSBC for the nominal sum of £1, the crisis engulfing Credit Suisse had fuelled anxiety about contagion in the international banking system.
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