UBS ends taxpayer support given to the Credit Suisse bailout

ZURICH (Reuters) – Swiss taxpayers are no longer in a bind over a Credit Suisse bailout after UBS (UBSG.S) said on Friday it would not need 9 billion francs ($10.3 billion) in government guarantees for a smooth operation. . take over its failed competitor.

UBS also said it no longer needed a public liquidity support or liquidity assistance loan of up to 100 billion francs from the Swiss National Bank (SNB) backed by a federal guarantee, freeing it from taxpayer-backed financing.

The Swiss government said that “these measures, which were put in place under emergency law to maintain financial stability, will cease to exist, and the Union and taxpayers will no longer bear any risks arising from these guarantees.”

Andreas Vendetti, an analyst at Vontobel, said the news should quell the political debate over exposure of Swiss taxpayers to UBS.

Shares of Switzerland’s largest bank were up 5% at 1000 GMT.

UBS agreed on 19 March to buy Credit Suisse for an approximate price of 3 billion francs and up to 5 billion francs in supposed losses in a bailout orchestrated by Swiss authorities with Switzerland’s second largest bank on the verge of collapse.

Credit Suisse and UBS also borrowed 168 billion francs from the Swiss National Bank in various emergency liquidity plans to facilitate the deal.

The bailout created a Swiss banking and wealth management giant with a balance sheet of $1.6 trillion and was the largest banking deal since the 2008 financial crisis.

UBS also said on Friday that Credit Suisse has fully repaid an emergency liquidity assistance (ELA+) loan of CHF50 billion to the Swiss National Bank.

But it decided not to terminate the agreement giving it access to these funds as a precautionary measure, making it possible for the bank to re-access the liquidity lifeline in the future if needed.

By limiting the involvement of the Swiss authorities, UBS can hope for more autonomy in some of the major and politically charged decisions it has to make.

“The voluntary early repayment could also help with other things, such as negotiating the retention of Credit Suisse of Switzerland, in our view,” Citi analyst Andrew Combs said.

UBS was considering whether to keep Credit Suisse’s local business. Freeing itself from taxpayer subsidies could make it easier for UBS to cut costs, with potentially thousands of jobs at stake. UBS previously said it expected to provide an update by the end of the summer.

A person familiar with the matter said that as of July, an emergency liquidity assistance loan of 43 billion francs with the central bank remained on hold.

A government guarantee of up to 9 billion francs in respect of losses that UBS may incur from the sale of Credit Suisse’s assets, in excess of the 5 billion francs that UBS agreed to cover itself.

The chief executive and chairman of UBS on Friday told employees in a note seen by Reuters that he will report on other accomplishments he made in the merger with Credit Suisse as well as second-quarter results on Aug. 31.

UBS also said that, together with Credit Suisse, it had paid more than 700 million francs in fees and risk premiums for guarantees and emergency liquidity facilities.

($1 = 0.8760 Swiss francs)

(Reporting by Noel Ellen) Editing by Jacqueline Wong and Mark Potter

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