Swiss authorities brokered the controversial emergency rescue of Credit score Suisse by UBS for 3 billion Swiss francs ($3.37 billion) over the course of a weekend in March.
Fabrice Coffrini | AFP | Getty Photographs
UBS and the Swiss authorities introduced Friday that that they had signed a loss safety settlement, which can come into impact as soon as the takeover of Credit score Suisse is accomplished.
The provisions will see the Swiss authorities cowl losses of as much as 9 billion Swiss francs ($10 billion) following UBS’ acquisition of its former rival. That is assured on a “designated portfolio of Credit score Suisse non-core belongings,” as soon as UBS incurs the primary 5 billion Swiss francs in losses.
“The precedence for the federal authorities and UBS is to minimise potential losses and dangers in order that recourse to the federal assure is averted to the best extent doable,” the Swiss authorities stated in an announcement.
The administration added that it had facilitated the deal to “safeguard monetary stability and thus avert harm to the Swiss economic system,” however had at all times agreed to ensure a portion of losses resulting from UBS taking on a portfolio of belongings that “don’t match its enterprise and danger profile.”
In return, the settlement states that, after the takeover, UBS should assist the event of Switzerland’s standing as a monetary centre. The financial institution has confirmed intentions to maintain the headquarters of the merged group in Switzerland at some point of the loss safety provisions.
“UBS will handle these belongings in a prudent and diligent method and intends to reduce any losses and maximize worth realization on these belongings,” UBS stated.
UBS Group shares have been down 0.2% at 10:00 a.m. London time.
‘Shotgun marriage ceremony’
Final month, the financial institution disclosed it anticipated a monetary hit of round $17 billion on account of buying its rival, in what has been described in some quarters as a “shotgun marriage ceremony” to stabilize the Swiss monetary system.
The Swiss banking rivals agreed a $3.2 billion takeover deal initially of spring, at a time of broader volatility within the banking sector that led to the collapse of three U.S. banks. Credit score Suisse shares cratered via early March, with years of scandals, losses and alleged mismanagement coming to a head when its largest shareholder, the Saudi Nationwide Financial institution, stated it was not capable of present any additional cash to the financial institution due to regulatory restrictions.
The merger of the 2 banking juggernauts has been greeted with some controversy, enraging Credit score Suisse shareholders and bondholders in addition to elevating competitors considerations.
The financial institution expects the Credit score Suisse acquisition to finish as early as June 12.