- UBS and the federal government have signed the contract for a CHF 9 billion loss guarantee for the takeover of Credit Suisse by UBS.
- The Federal Department of Finance (FDF) and UBS announced that the contract was signed on Friday.
- There are strict requirements for the federal guarantee, as the FDF writes.
According to the agreement, the federal government will assume a loss guarantee of CHF 9 billion on a certain portfolio of CS assets that are “difficult to value”. However, this only happens if UBS makes losses on these assets that are greater than CHF 5 billion.
The agreement covers a specific portfolio of CS assets, representing approximately 3% of the combined bank’s assets. According to EFD, it is about loans, derivatives, non-strategic and structured products that are not part of CS’s core business. UBS will report on this non-core business every quarter.
The guarantee only covers actual losses. Only when the assets in question have finally been sold can UBS claim any losses in excess of CHF 5 billion from the Confederation. This is possible for a maximum of CHF 14 billion because the federal government cannot make any commitments beyond CHF 9 billion. If he had to do this, a legal basis and the yes of Parliament to the necessary commitment credit would be required.
UBS headquarters must remain in Switzerland
UBS is obliged to manage the assets in such a way that losses are minimized and realization proceeds are maximized. The federal government has comprehensive information and audit rights. The bank must keep its headquarters in Switzerland.
UBS is also required to create a separate organizational unit and set up a supervisory committee to report to the Confederation on a quarterly basis. The primary goal is to keep the financial and legal risks for the federal government and taxpayers as small as possible.
Date of acquisition fixed
The Federal Council was informed of the conclusion of the contract at its meeting. The loss guarantee by the federal government had already been announced when the competitor UBS announced the takeover of CS. At the time, the federal government agreed to bear part of any losses from the takeover.
UBS wants to take over CS on June 12, i.e. on Monday, as announced at the beginning of the week. According to the FDF, the loss guarantee from the federal government is necessary to make the takeover possible.