A worker climbs on a ladder that bears the logo of UBS at their Zurich headquarters on May 26, 2011.
What is a summary?
The Government of India had granted 9 billion francs in loss protection.
The ELA+ loan obtained by Credit Suisse has been fully repaid.
Source: UBS had an outstanding loan at SNB in July – 43 bln francs.
Shares at UBS have risen by 5%.
Swiss taxpayers are no longer liable for the rescue of Credit Suisse, as UBS (UBSG.S) announced on Friday that it would not need state guarantees worth 9 billion francs to take over its struggling rival.
The use of taxpayer-backed funding by UBS has been eliminated, along with the removal of its need for a public liquidity backstop and securing ‘a federal guarantee supported by the Swiss National Bank (SNB)’ to provide up to 100 billion francs of liquidity assistance.
The Swiss government declared that the emergency law, which was implemented to maintain financial stability, would no longer be in place, and therefore, these measures will no more pose any risks to the Confederation or taxpayers.
According to Andreas Venditti, a Vontobel analyst, the news should help to ease the political controversy surrounding Swiss taxpayers’ involvement with UBS.
The largest bank in Switzerland had a 5% increase in its shares by 1000 GMT.
In a rescue operation with Switzerland’s second-largest bank on the brink of collapse, UBS agreed to buy Credit Suisse on March 19, offering 5% reduction at 3 billion francs and up to 5 billion euros in assumed losses.
To ease the deal, Credit Suisse and UBS borrowed 168 billion francs from the SNB through various emergency liquidity schemes.
A Swiss banking and wealth management giant with a $1.6 trillion balance sheet was created as the biggest banking rescue since the 2008 financial crisis.
On Friday, UBS announced that Credit Suisse had repaid an Emergency Liquidity Assistance Plus (ELA+) loan of 50 billion francs to SNB.
The bank opted not to terminate the agreement, as it could only access these funds as a precautionary measure and potentially recover the liquidity support in the future.
By limiting the involvement of Switzerland’s authorities, UBS could potentially gain more autonomy in important and politically sensitive matters.
According to Andrew Coombs, a Citi analyst, the early voluntary repayment could be advantageous in other aspects, such as negotiating for the retention of the Credit Suisse Swiss business.
UBS has been mulling over the option of keeping Credit Suisse’s domestic operations. Either way, it may be easier than ever to reduce expenses and potentially eliminate thousands of jobs.
A source with knowledge of the situation revealed that the central bank had approved a 43 billion franc emergency liquidity assistance loan in July, which was still outstanding.
A maximum of 9 billion francs in government guarantees to cover losses that UBS may incur from the sale of its Credit Suisse assets, exceeding the 5- billion it agreed to pay.
In a memo seen by Reuters, UBS’s chief executive and chairman announced on Friday that the bank would disclose additional milestones in the merger with Credit Suisse as part of its second-quarter results set for the end of August.
UBS and Credit Suisse jointly paid over 700 million francs in fees and risk premiums for guarantees and emergency liquidity facilities, as announced by the bank.
($1 is equivalent to 0.8760 Swiss francs)
Noele Illien was responsible for reporting, while Jacqueline Wong and Mark Potter handled editing.
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