Swiss authorities brokered the controversial emergency rescue of Credit Suisse by UBS for 3 billion Swiss francs ($3.37 billion) over the course of a weekend in March.
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UBS and the Swiss government introduced Friday that they’d signed a loss protection agreement which is able to come into impact as soon as the takeover of Credit Suisse is accomplished.
The agreement will see the Swiss government cowl losses of as much as 9 billion Swiss francs ($10 billion) following UBS’ acquisition of its rival.
“As a part of the agreement, the Swiss government ensures losses of as much as CHF 9bn if realized on a delegated portfolio of Credit Suisse non-core belongings as soon as UBS bears the first CHF 5bn of any realized losses,” UBS stated in an announcement.
“UBS will handle these belongings in a prudent and diligent method and intends to reduce any losses and maximize worth realization on these belongings.”
The acquisition of Credit Suisse is anticipated to happen as early as June 12, UBS stated.
It comes after the Swiss banking rivals agreed a $3.2 billion takeover deal in March amid volatility in the world banking sector, as three U.S. banks collapsed at the time.
Credit Suisse shares cratered by way of early March, with years of scandals, losses and alleged mismanagement coming to a head when its largest shareholder, the Saudi National Bank, stated it was not in a position to present any more money to the financial institution due to regulatory restrictions.
The merger of the two banking juggernauts has been controversial in lots of quarters, enraging Credit Suisse shareholders and bondholders in addition to elevating competition concerns.
UBS Group shares had been flat at 9:22 a.m. London time.