Switzerland's biggest bank, UBS, will take over Credit Suisse for $3.25 billion, as part of an effort to restore trust in the global banking system, the Swiss government said. 

The wealthy Alpine nation is famed for its banking prominence and Swiss President Alain Berset said the takeover was the "best solution for restoring the confidence that has been lacking in the financial markets recently."

After suffering heavy falls on the stock market last week, Credit Suisse's share price closed on March 17 at 1.86 Swiss francs ($2.01), with the bank worth just over $8.7 billion.

If Credit Suisse had gone into free fall, it would have had "incalculable consequences for the country and for international financial stability," Berset said.

The takeover has "laid the foundation for greater stability both in Switzerland and internationally," said Swiss Finance Minister Karin Keller-Sutter.

The move was welcomed in Washington, Frankfurt and London as one that would support financial stability, after a week of turbulence following the collapse of two U.S. banks.

European Central Bank chief Christine Lagarde also welcomed the "swift action." The decisions taken in Bern "are instrumental for restoring orderly market conditions and ensuring financial stability," Lagarde said.

U.S. Federal Reserve chair Jerome Powell and Treasury Secretary Janet Yellen said in a joint statement: "We welcome the announcements by the Swiss authorities today to support financial stability."

The Fed and the central banks of Canada, Britain, Japan, the EU and Switzerland announced they would launch a coordinated effort on Monday to improve banks' access to liquidity, hoping to calm worries rattling the global banking sector.

Read more: Under pressure to merge with UBS, Credit Suisse meets to weigh options

(With input from AFP)