'With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,' the Swiss central bank says.
The deal includes 100 billion Swiss francs in liquidity assistance for UBS and Credit Suisse from the Swiss central bank.
To enable UBS to take over Credit Suisse, the federal government is providing a loss guarantee of a maximum of 9 billion Swiss francs for a clearly defined part of the portfolio, the government said. This will be activated if losses are actually incurred on this portfolio. In that eventuality, UBS would assume the first 5 billion francs, the federal government the next 9 billion francs, and UBS would assume any further losses, the government said.
Switzerland’s regulator FINMA said that there was a risk that Credit Suisse could have become “illiquid, even if it remained solvent, and it was necessary for the authorities to take action.” Credit Suisse Additional Tier 1 shares with a nominal value of around 16 billion francs will be written down completely after the Swiss government provided support for UBS’ takeover of Credit Suisse, FINMA said.
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