UBS Declines State Guarantees: Swiss bank UBS (UBSG.S) said Friday that it no longer needed the 9 billion francs ($10.3 billion) in state guarantees to buy Credit Suisse. These promises initially helped UBS buy Credit Suisse. This is crucial. This judgement protects Swiss taxpayers from current money handling practices.
UBS also implied that it didn’t require the Swiss National Bank (SNB) loan of up to 100 billion francs for liquidity. This made UBS appear to not need the public cash backstop. This decision frees UBS from using government funds. The Swiss government has stated that these processes, originally implemented as part of an emergency law to stabilize the economy, will be discontinued. The public will be relieved to no longer bear the risk.
Vontobel market analyst Andreas Venditti says this fresh information should conclude the political argument concerning Swiss taxpayers’ UBS vulnerability. This should ease financial conditions. After fresh information, Andreas Venditti feels political discourse about Swiss taxpayers’ vulnerability to UBS should stop.
This boosted UBS shares by 5% at 1000 GMT. Investors were excited about the bank’s strategic approach.
On March 19, UBS bought Credit Suisse for 3 billion Swiss francs. This purchase cost UBS 5 billion Swiss francs. Always remember this. A well-planned rescue operation was needed to save Credit Suisse, which threatened the global banking system.
Credit Suisse and UBS used SNB emergency funding to save the company. These 168 billion Swiss franc ideas helped form the new firm.
This rescue effort created a $1.6 trillion Swiss banking and wealth management firm. This bank deal is the most significant since the 2008 global financial crisis.
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UBS said that Credit Suisse has repaid the Swiss National Bank’s 50 billion Swiss franc ELA+ loan. Important change. UBS believes retaining the deal that gives them access to these funds is best for them. This secures the monetary lifeline for future use.
UBS may be aiming to give itself more leeway to make politically difficult decisions by limiting Swiss authorities’ involvement. This modification reduces Swiss officials’ workload.
Citi analyst Andrew Coombs said a voluntary early repayment might help Credit Suisse retain its Swiss businesses. Coombs responded to whether early debt repayment was better. The borrower would never have to pay this early. UBS’s decision to quit receiving public funds may make it simpler to decrease costs, affecting tens of thousands of employees. UBS will update these issues by summer’s end.
According to a source, a 43 billion franc central bank emergency cash support loan was still outstanding in July.
Now that UBS has taken certain steps, the government’s guarantee of up to 9 billion Swiss francs to reimburse UBS for losses from the sale of Credit Suisse assets is less important. These precautions were adopted because of UBS.
The CEO and Chairman of UBS told colleagues in a memo that the firm will reveal more about its plans to merge with Credit Suisse when it reported second-quarter results on August 31. UBS CEO and Chairman informed workers. This event would occur simultaneously with the last.
UBS and Credit Suisse paid over 700 million Swiss francs in emergency cash facility and guarantee costs and risk charges. Credit Suisse provided this sum. This clarifies how much money is needed for this strategy aim.
Our Reader’s Queries
What went wrong with UBS?
UBS is facing a lawsuit that accuses the company of misleading investors by presenting the securities as safer than they actually were. The suit also claims that UBS failed to provide adequate disclosure regarding the risky loans that backed the securities.
What is the Swiss government guarantee for UBS?
As part of the measures, UBS received a federal loss protection guarantee of CHF 9 billion, while the SNB was guaranteed CHF 100 billion to provide liquidity assistance loans to Credit Suisse. These guarantees were put in place to ensure the stability of the financial system.
What will happen if UBS takes over Credit Suisse?
Despite the decision to merge Credit Suisse into UBS, Credit Suisse (Schweiz) AG and UBS Switzerland AG will remain separate entities until the legal integration is finalized. At present, clients’ banking relationships will remain unchanged.
Is UBS too big to fail?
According to analyst Jaret Seiberg, UBS has now become the world’s safest bank for depositors. This is due to Switzerland’s decision to make UBS too big to fail, following its acquisition of Credit Suisse for $3.2 billion. The Swiss authorities have made it clear that UBS is a depositor safe haven, ensuring that customers can trust their money is secure.