UBS won’t need government loss protection deal in Credit Suisse takeover

SWITZERLAND’S biggest bank UBS said on Friday (Aug 11) it will not need to tap the government’s nine billion Swiss franc (S$13.9 billion) backstop agreed as part of the state-sponsored takeover of Credit Suisse.

UBS also said it no longer needs the public liquidity backstop, a liquidity assistance loan of up to 100 billion francs from the Swiss National Bank and backed by a federal guarantee.

“These measures, which were created under emergency law to preserve financial stability, will thus cease to exist, and the Confederation and taxpayers will no longer bear any risks arising from these guarantees,” the Swiss government said on Friday.

Switzerland’s authorities introduced a host of emergency financial guarantees as part of UBS’ takeover of collapsed Credit Suisse.

Among these, UBS reached an agreement with Bern under which the government would guarantee up to nine billion francs of losses UBS may incur from the sale of its rival’s assets beyond five billion francs the lender agreed to cover itself.

The deal, which created a Swiss banking and wealth management giant with a US$1.6 trillion balance sheet, was the biggest banking deal since the 2008 financial crisis.

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UBS agreed on Mar 19 to buy Credit Suisse for a knockdown price of three billion francs and up to five billion francs in assumed losses, in a rescue orchestrated by Swiss authorities with Switzerland’s second-largest bank on the edge of collapse.

Credit Suisse and UBS also borrowed 168 billion francs from the Swiss National Bank in various emergency liquidity schemes to ease the takeover.

UBS said on Friday that Credit Suisse has fully repaid the Emergency Liquidity Assistance Plus loan of 50 billion francs to the Swiss National Bank. REUTERS