UBS Sheds Swiss Government Aid for Credit Suisse Takeover
Swiss bank says it no longer needs $10 billion backstop or liquidity lines UBS said the cost of state assistance tied to its Credit Suisse takeover came to more than $800 million in fees. Photo: DENIS BALIBOUSE/REUTERS By Margot Patrick Aug. 11, 2023 3:53 am ET UBS said it would no longer rely on Swiss government assistance tied to its emergency takeover of Credit Suisse in March, marking an important step in the complex and politically fraught absorption of its smaller rival. The Swiss bank said it terminated a roughly $10 billion government backstop that had limited its potential losses on some Credit Suisse assets. UBS also exited emergency liquidity lines the country’s central bank had provided to keep Credit Suisse afloat. UBS bought Credit Suisse after th
UBS said the cost of state assistance tied to its Credit Suisse takeover came to more than $800 million in fees.
Photo: DENIS BALIBOUSE/REUTERS
UBS said it would no longer rely on Swiss government assistance tied to its emergency takeover of Credit Suisse in March, marking an important step in the complex and politically fraught absorption of its smaller rival.
The Swiss bank said it terminated a roughly $10 billion government backstop that had limited its potential losses on some Credit Suisse assets. UBS also exited emergency liquidity lines the country’s central bank had provided to keep Credit Suisse afloat.
UBS bought Credit Suisse after the latter came close to collapsing as customers pulled deposits. Credit Suisse needed emergency funding before and during the rescue to keep operating.
Swiss bank UBS agreed to take over its longtime rival Credit Suisse as authorities seek to halt a dangerous decline in confidence in the global banking system. WSJ’s Patricia Kowsmann explains how the deal unfolded and what might come next. Photo: Hannah McKay/Reuters (Published in March)
UBS said it had ended its participation in the programs after reviewing Credit Suisse’s noncore assets and funding at both banks. It had demanded the backstop because it couldn’t reliably value what was held on Credit Suisse’s books in a rushed deal put together in days.
“These measures, together with the intervention of UBS, contributed to the stabilization of Credit Suisse and financial stability in Switzerland and globally,” the bank said. “UBS continues to focus on the successful execution of the integration of Credit Suisse.”
UBS said the cost of the lifelines and unused backstop came to more than $800 million in fees paid to Swiss authorities.
The Swiss central bank on Friday said liquidity lines were drawn for as much as around $191 billion while in use.
Switzerland’s government provided a loss-protection backstop so that if UBS lost more than the equivalent of around $5.7 billion on certain Credit Suisse assets, the government would pay up to the next $10.3 billion in losses.
UBS has said it is reviewing whether to keep Credit Suisse’s large domestic unit or possibly spin it out or sell it. Analysts have said that shedding the state guarantee would make it more palatable politically to keep and integrate the unit with its own Swiss bank, which is UBS’s plan A.
Write to Margot Patrick at [email protected]
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