UBS agreed to buy its embattled rival Credit Suisse with Swiss regulators playing a key part in the deal as governments looked to stem a contagion threatening the global banking system.

“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” read a statement from the Swiss National Bank, which noted the central bank worked with the Swiss government and the Swiss Financial Market Supervisory Authority to bring about the combination of the country’s two largest banks.

The Swiss National bank pledged a loan of up to 100 billion ($108 billion) Swiss francs to support the takeover. The Swiss government also granted a guarantee to assume losses up to 9 billion Swiss francs from certain assets over a preset threshold “in order to reduce any risks for UBS,” said a separate government statement. No amount was given in the initial statement.

The UBS deal was rushed together before markets reopened for trading Monday after Credit Suisse shares logged their worst weekly decline since the onset of the coronavirus pandemic. The losses came despite a new a loan of up to 50 billion Swiss francs ($54 billion) granted from the Swiss central bank to halt the slide and restore confidence of the bank’s counterparties in the financial markets.

Credit Suisse had already been battling a string of losses and scandals, and the last two weeks sentiment was rocked again as banks in the U.S. reeled from the collapse of Silicon Valley Bank and Signature Bank. U.S. regulators’ backstop of uninsured deposits in the failed banks and the creation of a new funding facility for troubled other financial institutions failed to stem the shock and is threatening to envelop more banks both in the U.S. and abroad.

Despite regulators’ involvement in the pairing, the deal gives UBS autonomy to run the acquired assets as it sees fit, which could mean significant job cuts, sources told CNBC’s David Faber.

Credit Suisse’s scale and potential impact on the global economy is much greater than U.S. regional banks, which pressured Swiss regulators to find a way to bring the country’s two largest financial institutions together. Credit Suisse’s balance sheet is around twice the size of Lehman Brothers when it collapsed, at around 530 billion Swiss francs as of the end of 2022. It is also far more globally interconnected, with multiple international subsidiaries — making an orderly management of Credit Suisse’s situation even more important.

Bringing the two rivals together was not without its struggles, but pressure to stave off a systemic crisis won out in the end. UBS initially offered to buy Credit Suisse for around $1 billion Sunday, according to multiple media reports. Credit Suisse reportedly balked at the offer, arguing it was too low and would hurt shareholders and employees, people with knowledge of the matter told Bloomberg. 

By Sunday afternoon, UBS was in talks to buy the bank for “substantially” more than 1 billion Swiss francs, sources told CNBC’s Faber. He said the price of the deal increased throughout the day’s negotiations. 

Credit Suisse lost around 38% of its deposits in the fourth quarter of 2022 and revealed in its delayed annual report early last week that outflows have still yet to reverse. It reported a full-year net loss of 7.3 billion Swiss francs for 2022 and expects a further “substantial” loss in 2023.

The bank had previously announced a massive strategic overhaul in a bid to address these chronic issues, with current CEO and Credit Suisse veteran Ulrich Koerner taking over in July.

—CNBC’s Katrina Bishop contributed to this report.