Swiss taxpayers are no longer responsible for the rescue of Credit Suisse, as UBS announced on Friday that it would not require the 10.3 billion Swiss francs ($9 billion) in state guarantees provided to facilitate the acquisition of its failing rival.
UBS also stated that it no longer required a public liquidity backstop or a liquidity assistance loan of up to 100 billion Swiss francs from the Swiss National Bank (SNB) that was supported by a federal guarantee, releasing it from taxpayer-backed funding.
Switzerland’s second-largest bank was on the verge of bankruptcy when UBS agreed on March 19 to purchase Credit Suisse for a discounted price of 3 billion francs plus up to 5 billion francs in assumed losses as part of a rescue orchestrated by Swiss authorities.
Credit Suisse and UBS also received 168 billion Swiss francs by the SNB through a variety of emergency liquidity programs in order to help with the transaction.
UBS also reported on Friday that Credit Suisse had repaid a 50 billion Swiss franc Emergency Liquidity Assistance Plus (ELA+) loan to the SNB. As a precaution, the bank chose not to terminate the agreement granting it access to these funds, allowing it to access the liquidity lifeline again in the future if necessary.
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UBS to Provide Update on Merger with Credit Suisse by August 31
UBS has considered retaining Credit Suisse’s domestic operations. It would be simpler for UBS to cut costs if it were no longer subsidized by taxpayers, with potentially thousands of jobs at risk. UBS previously stated that it would provide an update by the end of summer.
The government’s guarantee of up to 9 billion Swiss francs pertained to losses UBS could incur from the sale of Credit Suisse assets in excess of the 5 billion Swiss francs UBS agreed to cover.
Friday, the CEO and chairman of UBS informed staff in a memo seen by Reuters that the company would provide an update on the merger with Credit Suisse along with its second-quarter results on August 31.
UBS and Credit Suisse have paid over 700 million Swiss francs in fees and risk premiums for the guarantees and emergency liquidity facilities, according to UBS.
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Source: Yahoo Mail, Reuters
