UBS Group Ends Credit Suisse’s Protection From The Government And Central Banks

(CTN News) – As part of its takeover of rival Credit Suisse in March, UBS ended a loss protection agreement worth 9 billion Swiss francs ($10.27 billion) and a public liquidity backstop worth 100 billion Swiss francs.

Credit Suisse’s non-core assets covered by liquidity support measures were subject to a “comprehensive assessment” by UBS.

“These measures, along with UBS’ intervention, have contributed to the stabilization of Credit Suisse and financial stability in Switzerland and globally,” UBS stated.

The Swiss National Bank lent Credit Suisse 50 billion Swiss francs in emergency liquidity assistance plus (ELA+) in March, as the lender was on the verge of bankruptcy following a collapse in investor confidence.

The Swiss government announced on Friday that “these measures, which were designed under emergency law in order to preserve financial stability, will cease to exist. As a result, the Confederation and taxpayers will no longer bear any risks arising from these guarantees.”

In addition, the Confederation received receipts from the guarantees of approximately CHF 200 million.”

Swiss Federal Council plans to introduce a public liquidity backstop (PLB) under ordinary law, while the work on a “comprehensive review of the too-big-to-fail regulatory framework” continues.

Under the 9 billion Swiss franc LPA, UBS will be insured against losses exceeding 5 billion Swiss francs following the takeover, which was arranged over a frenetic weekend in March during talks with the Swiss government, the Swiss National Bank, and the Swiss Financial Market Supervisory Authority.

The emergency rescue deal saw UBS acquire Credit Suisse at a discount of 3 billion Swiss francs, creating a Swiss banking and wealth management behemoth with a $1.6 trillion balance sheet.

After reviewing all assets covered by the LPA since June and taking the appropriate fair value adjustments,

UBS has concluded that the LPA is no longer necessary.

As a result, UBS has given notice of voluntary termination effective 11 August 2023. As compensation for the establishment of the LPA, UBS has paid a total of CHF 40 million to the Swiss Confederation.

A 100 billion Swiss franc public liability backstop was established by the Swiss government on March 19 and allows the Swiss National Bank to provide liquidity support to Credit Suisse if necessary, underwritten by a federal default guarantee.

In a statement released on Friday, UBS confirmed that all loans drawn under the PLB were fully repaid by Credit Suisse by the end of May, and that following a review of the group’s funding needs, the PLB agreement had been terminated.

According to UBS, Credit Suisse has incurred commitment fees and risk premiums totaling CHF 214 million through 31 July 2023, including approximately CHF 61 million to the Swiss National Bank and CHF 153 million to the Swiss Confederation.

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