'A financial banana republic': UBS-Credit Suisse deal puts Switzerland's reputation on the line

The demise of banking giant Credit Suisse sent shockwaves done fiscal markets and appears to person dealt a stroke to Switzerland's estimation for stability, with 1 enforcement suggesting investors volition present look astatine the mountainous cardinal European state arsenic "a fiscal banana republic."

UBS, Switzerland's largest bank, agreed connected Sunday to bargain its embattled home rival Credit Suisse for 3 cardinal Swiss francs ($3.2 billion) arsenic portion of a government-backed, cut-price deal.

Swiss authorities and regulators helped to modulate the agreement, which came amid fears of contagion to the planetary banking strategy aft 2 smaller U.S. banks collapsed successful caller weeks.

The rescue woody means Switzerland, a state heavy babelike connected concern for its economy, is connected way to spot its 2 biggest and best-known banks merge into conscionable 1 fiscal giant.

"Switzerland's lasting arsenic a fiscal centre is shattered," Octavio Marenzi, CEO of Opimas, said successful a probe note. "The state volition present beryllium viewed arsenic a fiscal banana republic."

"The Credit Suisse debacle volition person superior ramifications for different Swiss fiscal institutions. A country-wide estimation with prudent fiscal management, dependable regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away," Marenzi said.

Shares of UBS connected Tuesday roseate astir 4% by astir 10:15 a.m. London clip (6:15 a.m. ET), extending gains aft closing higher successful the erstwhile session.

Credit Suisse, meanwhile, was trading 0.6% little during greeting deals aft ending Monday's league down a whopping 55%.

"One diagnostic of this full banking unit that we've seen implicit the past week oregon 2 is that really yes we've seen large volatility successful equity markets, large volatility successful fixed income markets, and besides commodity markets, but precise small volatility successful overseas speech markets," Bob Parker, elder advisor astatine International Capital Markets Association, told CNBC's "Squawk Box Europe" connected Tuesday.

Asked astir however investors mightiness present deliberation astir Switzerland's estimation for stability, Parker replied, "When I was successful Zurich past week, this taxable really was a blistery topic."

He said determination had been "some precise modest" weakness successful the Swiss franc against the euro successful caller days, noting that this is the currency brace the Swiss National Bank focuses on.

One euro was seen trading astatine 0.9961 Swiss francs connected Tuesday morning, weakening from 0.9810 erstwhile compared to March 14.

"We've moved backmost adjacent to parity connected Swiss franc-euro. So, I deliberation to reply your question, yes, to immoderate grade the Swiss franc arsenic a harmless haven currency has mislaid immoderate of its allure. There is nary uncertainty astir that," Parker said.

"Will that beryllium regained? Probably yes, I would reason this is precise overmuch benignant of a short-term effect," helium added.

— CNBC's Elliot Smith contributed to this report.