ven, Août 11th 2023
The federal government and Swiss taxpayers can breathe a sigh of relief: UBS ends all state guarantees in connection with the emergency takeover of Credit Suisse.
The move by the big bank has been positively received by politicians, but also by investors.
The bank announced on Friday that UBS would voluntarily terminate the CHF 9 billion guarantee agreement with the Swiss government. The decision is based on a comprehensive review of the problematic parts of the CS portfolio, the so-called “non-core assets”.
The guarantee that has now been canceled would have come into effect if the loss on the portfolio had been more than CHF 5 billion. Apparently, the bank is now assuming that losses of this magnitude are unlikely: the bank has “extensively examined the assets, including severe stress loss scenarios,” according to the UBS statement.
In addition, the big bank has canceled the agreement on the liquidity assistance loan from the Swiss National Bank of up to CHF 100 billion with a default guarantee from the federal government with immediate effect. Credit Suisse, which is now part of UBS, fully repaid the so-called ELA+ loans (additional emergency liquidity agreement) of CHF 50 billion to the SNB on August 10, according to the big bank.
Revenue for the Confederation and the SNB
At a media conference on Friday, Finance Minister Karin Keller-Sutter was pleased with the move by the big bank. But she also made it clear that she had personally urged the big bank to do so: “I wanted to get rid of this guarantee quickly.” At the same time, the Federal Councilor underlined that the state had taken on guarantees totaling CHF 109 billion, but that no money had flowed: “The federal government has not spent any francs.”
Financially, the agreements for the Confederation and the SNB have paid off: The Confederation receives fees of CHF 40 million from the loss guarantee agreement alone, while a further CHF 160 million flow into the state coffers from the commitment and risk premiums for the state-guaranteed liquidity loan. In addition, there are payments to the National Bank as part of the liquidity loan of almost CHF 540 million. The costs incurred for UBS thus amount to around CHF 730 billion.
Stabilization achieved
The state guarantees and the liquidity aid were spoken in March as part of the takeover of the badly hit Credit Suisse by UBS as part of emergency law. An important conclusion from the point of view of the finance department is that the CS takeover and the accompanying measures have stabilized the financial system as intended, said the finance minister.
The situation surrounding the impending collapse of CS last March was “very serious,” emphasized Keller-Sutter. If CS had not been rescued, not only would many private individuals and SMEs have lost their assets, payment transactions would have collapsed as well. In addition, there was a risk of contagion in the international financial system: “We would have produced major upheavals in Switzerland,” said the finance minister.
Applause at stock exchange
UBS’s waiver of the state guarantee was well received on Friday both in politics and on the stock market. The FDP and GLP once again praised the actions of the Federal Council in the CS crisis, but the SVP and Greens also found evidence in the UBS step that the state government’s actions were not so “alternative”.
On the stock exchange, the UBS share price climbed by up to 5 percent on Friday: UBS’s move shows that the risk profile of the new UBS is better than feared, according to one commentator.
With the end of the emergency legal measures, UBS should also take something out of the political field. According to the announcement, the big bank itself now wants to continue to focus on the “successful implementation of the integration of Credit Suisse”. What the CS integration means for jobs at the new big bank should become clearer on August 31 at the latest when UBS’s half-year figures are published.
Keystone/SDA©
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