FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS. The Swiss National Bank (SNB) and the Swiss Confederation will provide additional liquidity to carry out the takeover. Both banks will be able to continue all their business activities with no restrictions or interruptions. Additionally, the Swiss Federal Council has acknowledged that the Federal Department of Finance (FDF) is temporarily suspending the already granted but deferred variable remuneration for Credit Suisse employees by means of an order to the bank. The Federal Council also instructed the FDF to propose further measures on variable remuneration for the financial years up to 2022 and thereafter.
The Credit Suisse Group was experiencing a crisis of confidence, which has manifested in considerable outflows of client funds. This was intensified by the upheavals in the U.S. banking market in March 2023. In order to stabilize the situation, FINMA took several measures such as investigated whether the statements give rise to indications of a violation of financial market law, which must be clarified within the framework of supervisory proceedings, released a statement highlighting no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the U.S. banking market, and also confirmed that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. Despite these measures, FINMA was unable to restore the confidence in the bank. There was a risk of the bank becoming illiquid, even if it remained solvent, and it was necessary for the authorities to take action in order to prevent serious damage to the Swiss and international financial markets. As a result, FINMA approved the takeover of Credit Suisse by UBS to protect depositors and the financial markets.
The takeover will result in a larger bank, for which the current regulations require higher capital buffers. FINMA will grant appropriate transitional periods for these to be built up. FINMA will very closely monitor the transaction and compliance with all requirements under supervisory law. To ensure that all obligations can continue to be met at all times throughout the transaction, further liquidity assistance will be assured. The liquidity provided by SNB will include a loan covered by a federal guarantee, while the Swiss Confederation will also provide guarantees for potential losses of certain assets that UBS will acquire as part of the transaction, if these losses exceed a specific threshold.
Keywords: Europe, Switzerland, Banking, Basel, Regulatory Capital, Liquidity Risk, Credit Risk, Credit Suisse, UBS, Variable Remuneration, Swiss Federal Council, FINMA, SNB
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