Global Courant
Swiss authorities brokered UBS’s controversial rescue of Credit Suisse for 3 billion Swiss francs ($3.37 billion) over a weekend in March.
Fabrice Cofrini | AFP | Getty Images
UBS and the Swiss government announced on Friday that they had signed a loss protection agreement, which will come into effect once the acquisition of Credit Switzerland is completed.
The provisions will see the Swiss government cover losses of up to 9 billion Swiss francs ($10 billion) following UBS’ acquisition of its former rival. This will be guaranteed on a “designated portfolio of non-core Credit Suisse assets” once UBS incurs the first 5 billion Swiss francs in losses.
“The priority for the federal government and UBS is to minimize potential losses and risks so that calls on the federal guarantee are avoided as much as possible,” the Swiss government said in a statement.
The administration added that it had facilitated the deal to “preserve financial stability and thus prevent damage to the Swiss economy”, but always agreed to guarantee a portion of the losses resulting from UBS’ acquisition of a portfolio of assets that “don’t suit his business”. and risk profile.”
In return, the agreement states that after the acquisition, UBS must support the development of Switzerland’s status as a financial center. The bank has confirmed its intention to maintain the headquarters of the merged group in Switzerland for the duration of the loss protection provisions.
“UBS will manage these assets in a prudent and diligent manner and intends to minimize any losses and maximize the realization of value of these assets,” said UBS.
Shares of UBS Group were down 0.2% at 10am London time.
‘Gun Wedding’
Last month, the bank announced that it expected a financial blow of about $17 billion from the acquisition of its rival, in what has been described in some quarters as a “shotgun wedding” to stabilize the Swiss financial system.
The Swiss banking rivals agreed a $3.2 billion takeover deal in early spring, at a time of broader banking sector volatility that led to the collapse of three US banks. Shares of Credit Suisse plummeted into early March, with years of scandals, losses and alleged mismanagement coming to a head when its largest shareholder, the Saudi National Bank, said it was unable to raise more cash to the bank due to regulatory restrictions. to provide.
The merger of the two banking juggernauts has been greeted with some controversy, enraging Credit Suisse shareholders and bondholders, as well as raising competition concerns.
The bank expects the acquisition of Credit Suisse to be completed as early as June 12.
(TagsToTranslate)UBS Group AG
