Credit Suisse and UBS could benefit from more than 260 billion Swiss francs ($280 billion) in state and central bank support, a third of the country's gross domestic product, as part of their merger to buffer Switzerland against global financial turmoil, documents outlining the deal show.
UBS said it will pay $3.2 billion for the 167-year-old flagship while the government said UBS would also take on the first $5.4 billion in losses from unwinding derivatives and other risky assets.
The total of 259 billion francs of support is equivalent to a third of Switzerland's entire economic output, which stood at 771 billion francs last year. In a memo seen by Reuters that was sent to staff on Sunday after the deal announcement, Credit Suisse reassured staff that their bonuses would be paid in full.Credit Suisse had already been drawing on the Swiss National Bank’s emergency liquidity assistance scheme.
The third tranche of support allows Credit Suisse to draw on a further 100 billion francs of funding via a public liquidity backstop, which is explicitly guaranteed by the Swiss government.Credit Suisse has been the biggest name ensnared in global market turmoil unleashed by the recent collapse of U.S. lenders Silicon Valley Bank and Signature Bank.
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