Troubled bank Credit Suisse has been rescued by its Swiss rival UBS.
Last night’s announcement came after a weekend of emergency talks in Switzerland between the two banks and the country's financial regulators.
The Swiss National Bank said the deal was the best way to restore the confidence of financial markets and to manage risks to the economy.
The Bank of England said it welcomed the "comprehensive set of actions".
Credit Suisse shareholders were deprived of a vote on the deal. They will receive one share in UBS for every 22.48 shares they own, valuing the bank at £2.6billion.
At the close of business on Friday, Credit Suisse had been valued at around £6.5billion.
Result
But the BBC says the deal has achieved what regulators set out to do - secure a result before the financial markets open today.
In a statement, Switzerland's central bank said "a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation".
The federal government said in order to reduce any risks for UBS it would grant a guarantee against potential losses worth £7.9billion
The Swiss central bank has also offered liquidity assistance of up to £90billion.
Meanwhile, central banks have moved globally to keep credit flowing after an unsettled period in the US banking sector and the Credit Suisse merger.
Six central banks, including the Bank of England, announced they would boost the flow of US dollars through the global financial system.
Swap line
The US dollar liquidity swap line arrangement will run from today.
In a statement the Bank of England, Bank of Japan, Bank of Canada, the European Central Bank, US Federal Reserve and Swiss National Bank launched the co-ordinated action to "enhance the provision of liquidity".
The announcement said it served as an "important backstop to ease strains in global funding markets" and to lessen the impact on the supply of credit to households and businesses.
Instead of borrowing on the open market, British banks will be able to go direct to the Bank of England, and it will borrow from the US Federal Reserve.
Global banking stocks slumped following the collapse of America's Silicon Valley Bank, despite reassurances from President Joe Biden that the US would do "whatever is needed" to protect the banking system.
Since SVB's collapse, the smaller Signature Bank also fell by the wayside and First Republic needed rescuing.