A German government spokesperson has said that "Chancellor Scholz welcomes the resolve of the Swiss authorities" and said the "the situation is not comparable to 2008/2009" - in reference to the financial crisis of that period.

"The German banking system is well positioned," he added.

Michael Race
Business reporter

After London’s main stock exchange index fell by 1.6% in early trading, the FTSE 100 recovered its losses by mid-morning.

The FTSE 100 is now up 0.34%, but shares in British banks are still down, with last week being their worst weekly performance in more than a year.

Shares in UBS are down 3.8%, but appear to be recovering after being down 12% in early trading.

Image source, EPA-EFE/REX/Shutterstock

We've been keeping across the reaction this morning to the news about troubled bank Credit Suisse - Switzerland's second biggest lender.

• On Sunday, the bank was bought by its rival UBS for $3bn (£2.5bn) - in a deal backed by Swiss authorities and designed to calm market jitters
• Shares in European banks took a hit in early trading, despite efforts by financial authorities to portray the Credit Suisse deal as good news
• European stock markets also started the day down, following trends earlier seen in Asia, but are now in positive territory
• Many analysts say this does not look like a repeat of the 2008 financial crash, though global rises in interest rates have put pressure on some banks
• We'll be watching for more market reaction when the New York Stock Exchange opens at 13:30 GMT

Stick with us as we bring you all the latest.

Noor Nanji
BBC business reporter

Image source, EPA

The recent market turmoil has complicated central banks' fight against inflation.

The Bank of England has raised interest rates 10 times in a row, as it tries to combat rising prices. But there's now less than a 50% chance of the Bank of England hiking interest rates again on Thursday, according to Reuters.

When interest rates rise, the impact is felt by borrowers - through higher mortgage and loan costs - and in better returns for savers across the UK.

If rate rises are paused, that could reduce some of the pressure on people's mortgages, as well as on people with credit cards, bank loans and car loans.

As we've been reporting this morning, troubled Swiss bank Credit Suisse was yesterday bought by its rival UBS, in a deal brokered by regulators and designed to calm market nerves.

Under the deal some investors will take a big hit.

That's because Swiss regulators decided that Credit Suisse's AT1 bonds – which had a notional value of $17bn (£14bn) – would be valued as zero.

These types of bond are riskier investments and have higher yields.

Regulators say the move helps the bank's capital, and it also reflects the desire to see private investors share the pain from the bank's troubles.

European bodies continue to offer reassurances, following this morning's volatility in European bank shares.

In a joint statement, the European Central Bank (ECB) and the European Banking Authority (EBA) say: “The European banking sector is resilient, with robust levels of capital and liquidity.”

And Norway has given its reaction - with a spokesperson for its central bank telling Reuters they do not see “any signs of liquidity challenges” in the country's banks.

While bank shares remain under pressure, European stock markets have been doing better this morning.

The leading French and German indexes are now in positive territory, having fallen by around 1% in early trading.

London's top index is currently up 0.16%.

Some more input from Germany following those earlier comments from the financial regulator.

The government says Swiss authorities have acted to "restore orderly market conditions and ensure financial stability" by pushing through yesterday's urgent buyout of Credit Suisse.

A spokesman for the German finance ministry tells Reuters the German financial system is stable.

He adds: “The German supervisory authorities and the European financial supervisory authorities are in close contact and are monitoring the situation closely and carefully."

Kevin Peachey
Cost of living correspondent

The question of whether ordinary people's savings are safe was a common query during the banking crisis of 15 years or so ago - and whenever there are signs of a run on a bank.

Things are even more secure for savers than they used to be. Banks are now required to be in a stronger position to withstand a shock. Savings protection have also been strengthened.

Savings security is not affected simply when a bank's share price falls. In the highly unlikely scenario that a bank or building society actually collapses, then deposit protection is in place.

In the UK, that means £85,000 per person, per institution is protected (or £170,000 in a joint account). So, if you have £85,000 in one bank, and another £85,000 in a separately licensed bank, then it is all safe if both went bust, under the Financial Services Compensation Scheme. There is also a higher temporary limit of £1m for six months, if you get a sudden influx of funds, such as an inheritance.

Protection is similar in the EU, and the US government has safeguarded deposits of up to $250,000 for a long time.

Image source, Getty Images

European bank shares have made some recoveries after tumbling in early trading.

By mid-morning, Deutsche Bank was down 4%, after slipping 10% earlier this morning, while BNP Paribas was down 3% compared with an earlier fall of more than 8%.

UBS - the bank that agreed to buy its troubled rival Credit Suisse - is now down 8% compared with an earlier slide of 13%.

Some more reaction from Switzerland itself next.

The takeover of Credit Suisse by UBS creates a big risk for the country, says the leader of the Social Democrats - the second-biggest party in parliament.

Speaking to Reuters, Roger Nordmann adds: "The new UBS is also another massive risk – it's going to have more than 1,500 billion francs (£1.3tn) in assets, and it's simply too big for Switzerland."

Noor Nanji
BBC business reporter

With investors jittery, shares tumbling and a series of banks apparently reaching the brink, comparisons have been drawn with the global financial crisis of 2008 - as we mentioned in our previous post.

But Lord Turner, who headed up the UK's financial watchdog at that time, told The Sunday Times he doesn't think we will see another banking crisis. He pointed out that banks have much more capital this time around, and that - unlike in 2008 - we are not at the end of a credit-fuelled property market boom which is about to crash.

As we reported below, Mark Yallop, the former UK chief executive of UBS, added that the problems at Credit Suisse were quite specific to that bank.

"This is a takeover of a challenged institution with particular idiosyncratic problems that relate to it specifically [and are] not reflective of broader issues in the banking markets," he told the BBC.

Sunday's takeover of Credit Suisse "should bring a great degree of confidence back to the banking market more generally," says Mark Yallop, the former head of UBS in the UK.

The challenges faced by the Swiss bank were "idiosyncratic problems" and "not reflective of broader issues in the banking market," he told BBC Radio 4’s Today programme earlier this morning.

Interviewed before the opening of European stock markets, Yallop was asked if the situation was reminiscent of the global financial crisis 15 years ago. He answered: "To be honest, I don't think it reminds me of 2008."

Yallop, who is now the chair of the Financial Markets Standards Board, explained that the banking sector was stronger following a decade of regulatory change.

All of what's happened in the last few weeks is set against the backdrop of a big global change - the sharp rise in borrowing costs over the past year.

Central banks around the world have been raising interest rates in an attempt to ease inflation.

This rise in rates has hit the value of even safe investments that banks keep some of their money in. This in turn has impacted investor confidence, and bank share prices.

Against this background, two mid-sized US banks focussed on the tech sector - Silicon Valley Bank and Signature Bank - collapsed earlier this month.

Credit Suisse - Switzerland's second biggest lender - is the latest casualty of the turmoil, being bought by its Swiss rival in a deal pushed by Swiss regulators to restore confidence.

Germany's financial watchdog has insisted the country's financial system remains stable and robust, after the troubles at Credit Suisse sparked turmoil in European bank shares.

Speaking after the takeover of the Swiss bank by rival UBS, a spokesperson for the Federal Financial Supervisory Authority (BaFin) said they were looking closely at market developments and would take them into account.

Jonathan Josephs
BBC business reporter

Image source, Reuters

This sharp sell-off of European shares follows a similar pattern during Monday's trading in Asia.

UBS - which is now Switzerland's only global bank - has seen a big drop in its value as have other major banks in London, Paris and Frankfurt.

The Swiss authorities forced the rescue of Credit Suisse after it suffered a string of high-profile problems in recent years which led investors to start moving their money out of the Swiss bank.

The French finance minister is amongst those policymakers to welcome the takeover as a good deal, but said he remains extremely vigilant to market reaction.

European bank shares are proving volatile - as investors remain concerned about wider problems in the industry.

Major falls were seen in early trading in Germany's Deutsche Bank and France's BNP Paribas, although shares in both have since recovered some losses.

BNP is still down about 5% and Deutsche Bank 6%.

In the UK, shares in Standard Chartered, HSBC and Barclays also took an early hit.

We're following the market reaction to a deal over troubled bank Credit Suisse - which was snapped up by its Swiss rival UBS on a Sunday. Swiss regulators had hoped the move would calm nerves.

• We first saw share prices fall in Asia this morning, then also here in London and across Europe as traders digested recent events
• Shares in the bank at the heart of the story - Credit Suisse - slumped significantly, by more than 60%
• British banks have also been hit, with shares falling by 2.9%, which comes on top of declines from last week
• Meanwhile, six of the world's biggest central banks are working together to keep credit flowing by boosting the flow of US dollars

Simon Jack
Business editor

UBS and Credit Suisse was a deal that neither side wanted to do, shouldn’t have been necessary on paper (Credit Suisse passed all its capital tests) and was forced through without a shareholder vote.

That doesn’t seem like a particularly confidence-inspiring set of circumstances, but Swiss regulators assessed it was the best outcome to calm frayed nerves.

So far it hasn’t worked. Shares in UBS are down 13% and others are falling too – with Deutsche Bank notably down 10% this morning.

It’s not panic but it's not stable.

British banks shares fell 2.9%, extending declines from last week, which was their worst weekly performance in more than a year.

HSBC and Standard Chartered were among the banks hardest hit, with shares falling 3.0% and 4.8%, respectively.

The Bank of England has said banks are "safe" after regulators agreed a rescue deal for Credit Suisse aimed at preventing fears over banks spreading.