UBS to take over Credit Suisse, assume losses of 5 billion Swiss francs | – #UBS #Credit #Suisse #assume #losses #billion #Swiss #francs
BERN, March 19 (Reuters) – UBS ( UBSG.S ) beat rival Swiss bank Credit Suisse ( CSGN.S ) by 3 billion Swiss franc (3.23 billion dollars) agreed to buy and 5 billion francs (5.4 billion dollars) agreed to buy. ) in losses, in a shotgun combination designed by Swiss authorities to prevent further market-shattering turmoil in global banking.
The deal involved UBS and Credit Suisse from the Swiss central bank 100 billion Swiss francs (108 billion dollars) includes liquidity assistance.
To enable UBS’ takeover of Credit Suisse, the federal government is providing a maximum loss guarantee of 9 billion Swiss francs for a defined portion of the portfolio, the government said.
This will be activated if losses actually occur in this portfolio. In that case, UBS would bear the first 5 billion francs, the federal government the next 9 billion francs and UBS any additional losses, the government said.
Swiss regulator FINMA said Credit Suisse “risks becoming illiquid even if it remains solvent and that authorities need to take action”.
Credit Suisse Additional Tier 1 shares, with a nominal value of about 16 billion francs ($17.2 billion), will be completely written off after the Swiss government backed UBS’s takeover of Credit Suisse, FINMA said.
167-year-old Credit Suisse, USA‘s creditors Silicon Valley Bank and Signature BankIt was the biggest name caught in the market jitters caused by its recent collapse, which forced it to bail out $54 billion in central bank financing last week.
“The solution to ensure financial stability and protect the Swiss economy in this exceptional situation with the takeover of Credit Suisse by UBS way found,” the Swiss central bank said.
Authorities were scrambling to save Credit Suisse, among the world’s biggest wealth managers, before financial markets reopened on Monday.
UBS and Credit Suisse are both in the group of 30 global systemically important banks closely watched by regulators, and a failure of Credit Suisse would shake the entire financial system.
The announcement came at a weekend after some rivals were cautious in their dealings with the struggling Swiss lender and its regulators urged it to do a deal with UBS.
FINMA, which said it had approved the acquisition, said recent measures to stabilize itself were “not sufficient to restore confidence in the bank and that wider options are being explored”.
The fortunes of the two banks have diverged sharply over the past year. UBS posted a profit of $7.6 billion in 2022, while Credit Suisse lost $7.9 billion. Shares of Credit Suisse are down 74% from a year ago, while shares of UBS are relatively flat.
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The Swiss government said it had guaranteed UBS 9 billion Swiss francs to “assume potential losses” from assets as part of the transaction.
UBS CEO Ralf Hamers and Chairman Colm Kelleher will remain at the helm of the combined bank.
“The deal strengthens UBS’s position as Switzerland’s leading universal bank,” UBS said.
Execution leaders anticipate structural changes at work news they gave
Kelleher said Credit Suisse would wind down its investment banking operations, but added that it was too early to comment on potential job cuts.
Kelleher also said Credit Suisse would retain its domestic business despite speculation it could be spun off amid competition concerns.
Credit Suisse Chairman Axel Lehmann called the merger “the best possible outcome.”
($1 = 0.9280 Swiss francs)
Reporting by John Revill, Noele Illien, John O’Donnell, Oliver Hirt and Tom Sims; Edited by Riham Alkousaa, Paul Carrel and Hugh Lawson
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2023-03-20 01:08:32
Source – reuters
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