UBS terminates Credit Suisse’s government safeguards

UBS has terminated the government-backed protections related to its March acquisition of Credit Suisse, including a 9 billion Swiss franc loss protection agreement and a 100 billion Swiss franc liquidity backstop.

This announcement came after UBS’s extensive evaluation of Credit Suisse’s non-core assets, which were safeguarded by these liquidity provisions.

These initiatives, augmented by UBS’s intervention, played a pivotal role in restoring stability to Credit Suisse and the broader financial framework in Switzerland and across the globe, UBS said in a recent statement.

Moreover, UBS confirmed that Credit Suisse has settled the emergency liquidity assistance plus (ELA+) loan, valued at 50 billion Swiss francs, which it procured from the Swiss National Bank in March. This step was essential at the time, as Credit Suisse faced a sharp decline in both shareholder and investor trust.

The Swiss government commented on Friday, “These arrangements, birthed from emergency legislation to uphold financial equilibrium, are henceforth nullified. Consequently, the Confederation and its taxpayers are exempt from any liabilities related to these assurances.”

In addition to these developments, the Confederation received approximately CHF 200 million in earnings from the guarantees. The Swiss Federal Council is gearing up to introduce a bill centred around a public liquidity backstop (PLB) under standard law while discussions persist on refining the existing “too-big-to-fail” regulatory structure.

The comprehensive rescue operation in March culminated in UBS purchasing Credit Suisse at a discounted 3 billion Swiss francs, merging two giants to form a banking titan with assets totalling $1.6 trillion.

© 2023 funds europe

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