UBS has reached an agreement with the Swiss government to cover potential losses of 9 billion francs ($9.9 billion) that resulted from the closure of parts of Credit Suisse’s business.
swiss banking giants UBS Group AG (SWX: UBSG) Has Finally Completed the Emergency Acquisition Credit Suisse Group AG (SWX: CSGN). that deal started The $3.2 billion acquisition finalized back in March is expected to impose a number of limitations and “red lines” for Credit Suisse.
First of all, among such limits is a restriction for Credit Suisse bankers to acquire new clients from high-risk countries. These countries include Libya, Russia, Sudan, Belarus, Democratic Republic of the Congo, El Salvador, Ethiopia, Guinea, Haiti, Iraq, Kosovo, Kyrgyzstan, Venezuela and more. Secondly, Credit Suisse employees are prohibited from participating in complex financial activities. Furthermore, they cannot launch new products without obtaining approval from the UBS management.
The full list of “red lines” released by UBS executives includes 11 financial risks and 12 non-financial risks. The prohibitions are designed to reduce any risk to the acquisition of UBS.
According to UBS CEO Sergio Ermotti and President Colm Kelleher, the deal marks “the beginning of a new chapter” for both UBS and Credit Suisse. It not only creates a powerful new financial institution but also marks the end of a difficult period for the banking industry.
UBS acquisition of Credit Suisse: Other details
A few months ago, the entire banking industry was facing significant challenges. The crisis was fatal for Credit Suisse, with the bank teetering on the brink of default. To prevent further consequences of the crisis, Swiss regulators sought an emergency solution, which was the acquisition of Credit Suisse by UBS Group. The agreement was signed on March 19, and the total amount of the acquisition was $3.2 million. Notably, this amount was 60% less than the bank’s $8 billion market cap as of March 17. The deal was supported by the Swiss National Bank, the Swiss Federal Department of Finance and the Swiss Financial Market Supervisory Authority (FINMA). Brokered between the two banks. According to the Swiss National Bank, the acquisition provided a solution to “secure financial stability and protect the Swiss economy in this extraordinary situation”.
As the deal was an emergency solution, Credit Suisse’s shareholders did not have a vote for or against the acquisition. Now, when it is completed, they will receive one UBS share for every 22.8 outstanding shares, as agreed between the two banks.
UBS has also reached an agreement with the Swiss government to cover potential losses of 9 billion francs ($9.9 billion) resulting from the closure of parts of Credit Suisse’s business.
Swiss regulators commented:
“To make the acquisition possible, the government guaranteed UBS for any losses incurred in the liquidation of Credit Suisse assets. The guarantee will be effective only if the losses from the liquidation of these assets exceed 5 billion Swiss francs and total 9 be limited to a billion francs.
UBS will be headquartered in Switzerland. A total of $5 trillion in total assets are overseen by the group.
Daria is a crypto enthusiast who strongly believes in the future of blockchain. Being a hospitality professional, she is interested in finding ways in which blockchain can transform various industries and bring our lives to a different level.
Bitcoin Crypto Related Post