The European financial system is “resilient” and has sufficient liquidity, the European Central Bank said on Monday, as banking shares plunged following the announcement that UBS would take over troubled rival Credit Suisse. “The European banking sector is resilient, with robust levels of capital and liquidity,” the ECB said in a joint statement with the European Banking Authority and the EU’s Single Resolution Board. The institutions said they welcomed the actions taken by the Swiss authorities “to ensure financial stability”. Switzerland announced on Sunday that UBS would buy stricken lender Credit Suisse for $3.25 billion, in a bid to prevent economic turmoil from spreading throughout the country and beyond. But the deal failed to calm market nerves, with European banking shares plunging in early trading on Monday. The rescue saga will see holders of around $17.3 billion worth of high-risk debt at Credit Suisse lose their investment. The so-called additional tier 1 (AT1) bonds will be written down in the mega-merger, regulators have announced. The ECB stressed in its joint statement that in the eurozone, shareholders would have been first in line to absorb losses before AT1 holders are hit, as part of reforms spurred by the global financial crisis. “Additional Tier 1 is and will remain an important component of the capital structure of European banks,” it said.