European stocks slide as Credit Suisse buyout fails to soothe investors

(Reuters) - European stocks fell on Monday and shares of Credit Suisse dived more than 60% after UBS agreed to buy the troubled bank in a $3 billion deal, valuing the Swiss lender at just a fraction of its market value and sparking fears of a broader banking crisis.

The pan-European STOXX 600 index fell 0.8% by 0807 GMT, after having recorded its biggest weekly decline of the year on Friday.

Shares of Credit Suisse slumped 62.3% after rival UBS Group AG said it will pay 3 billion Swiss francs ($3.23 billion) for the 167-year-old bank and assume up to $5.4 billion in losses, in a package orchestrated by Swiss regulators on Sunday.

Shares of UBS dropped 8.8%.

Investors were also spooked by news that Credit Suisse additional tier-1 bonds - or AT1 bonds - with a notional value of $17 billion will be valued at zero, angering some of the holders of the debt who thought they would be better protected than shareholders.

The wider European banking index slid 3.2% to hit its lowest level in three months.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips)