UBS acquires Credit Suisse for $118bln: Swiss authorities

By Al Mayadeen English
Source: Agencies
29 Mar 2023 20:49
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This comes after SNB said it agreed to acquire Credit Suisse by UBS and that it may grant UBS a liquidity assistance loan with privileged creditor status in bankruptcy of up to 100 billion Swiss francs ($108 billion) after the takeover.

The company's logo is seen at a branch of Swiss bank UBS in Zurich, Switzerland February 2, 2016. (ReuterS)

Swiss authorities granted 109 billion Swiss francs ($118 billion) in urgent guarantee credits for the Swiss National Bank (SNB) and UBS to acquire Credit Suisse, government sources said on Wednesday.

This comes after SNB said it agreed to acquire Credit Suisse from UBS and that it may grant UBS a liquidity assistance loan with privileged creditor status in bankruptcy of up to 100 billion Swiss francs ($108 billion) after the takeover.

"The Federal Council adopted the special dispatch on the two urgent guarantee credits for the Swiss National Bank (SNB) and UBS during its meeting on 29 March 2023. These guarantees are for a total of CHF 109 billion and have no immediate financial implications for the Confederation," the government said in a statement.

It added that authorities grant a default guarantee and a loss protection guarantee to prevent the imminent failure of Credit Suisse (CS).

"Default guarantee in the amount of CHF 100 billion in favor of the SNB for additional liquidity assistance loans from the SNB to CS. The additional liquidity assistance guaranteed by the Confederation will take effect only in case of need and will ensure business continuity at CS, thereby enabling an orderly takeover by UBS... Loss protection guarantee in the amount of CHF 9 billion for UBS. To enable UBS to take over Credit Suisse, the federal government provided a loss guarantee of a maximum of CHF 9 billion for a specific portfolio of difficult-to-assess CS assets," the statement read.

The parliament is scheduled to assess these packages during the extraordinary session in April.

Earlier today, AFP reported that UBS is bringing back its former CEO to lead the company through the "huge amount of risk" entailing the Credit Suisse merger.

Sergio Ermotti, the bank's chief from 2011 to 2020, was considered a "better pilot" by the board of Switzerland's largest bank than the current executive chief Ralph Hamers, Kelleher added.

"There's a huge amount of risk in integrating these businesses," Kelleher told reporters in Zurich.

On March 19, UBS agreed to acquire global investment bank Credit Suisse for over $3.2 billion after the latter's market value plummeted sharply earlier this month, nearing the bank from imminent bankruptcy.

Both banks are considered to be global systemically important financial institutions (G-SIFIs), which made financial institutions worldwide monitor closely the dangerous situation.

Swiss newspaper SonntagsZeitung called it "the merger of the century".

"The unthinkable becomes true: Credit Suisse is about to be taken over by UBS," the tabloid said. The government, Swiss Financial Market Supervisory Authority FINMA and the SNB "see no other option", it added.

"The pressure from abroad had become too great -- and the fear that the reeling Credit Suisse could trigger a global financial crisis."