2023-06-09 09:37:53
The Confederation and UBS signed the loss guarantee agreement on Friday, agreed in the context of the takeover of Credit Suisse. The number one bank will only be able to draw on this guarantee capped at 9 billion francs following having taken on 5 billion.
“The Confederation has granted UBS a guarantee covering possible losses related to the realization of Credit Suisse assets,” the Federal Department of Finance (FDF) said in a statement.
The FDF underlined that “the Confederation and UBS have as a priority the reduction of possible losses and risks in order to avoid, if possible, recourse to the guarantee of the Confederation”.
3% of total assets
Specifically, the guarantees relate to a specific portfolio of Credit Suisse assets representing approximately 3% of UBS’s total assets at the end of the acquisition. In detail, it is made up of loans, derivatives, non-strategic instruments and structured products that are not part of the core business of the bank with two veils.
Public support only covers realized and permanent losses.
If UBS does not use this aid, the Confederation might emerge as a beneficiary of the operation. UBS must indeed pay a guarantee premium to Berne, consisting of a departure payment of 40 million francs, the annual fee of 0.4% deducted from the 9 billion (i.e. 36 million per year) and a risk premium between 0% and 4% depending on the losses already realized and still expected.
Credit Suisse has repaid to the Swiss National Bank all of the loans granted under the public liquidity guarantee mechanism (PLB). “The guarantee therefore did not cause any loss for the Confederation, but on the contrary brought in revenue of 111 million francs”, rejoiced the DFF.
Termination possible at any time
The UBS guarantee contract will end when the portfolio concerned by the guarantee has been definitively realised. The number one Swiss bank can terminate the guarantee contract at any time, but would then waive the guarantee of the Confederation.
UBS will have to comply with strict rules: it must manage the assets in such a way as to reduce losses and maximize revenue, create a dedicated structure, set up a supervisory committee and commit to keeping its headquarters in Switzerland. The Confederation has extensive information and audit rights.
The finalization of the historic merger between UBS and Credit Suisse decided urgently on March 19, which marks the end of the establishment founded by Alfred Escher in 1856, is expected on Monday. After the closing of the operation, the shares and American certificates of deposit (ADS) of Credit Suisse will be discounted on the Zurich (SIX) and New York (NYSE) exchanges.
>> Details from 12:30 p.m. on the finalization of the takeover of Credit Suisse:
>> Read also: UBS expected to complete Credit Suisse takeover as early as June 12
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