- Swiss bank delivers Credit Suisse to UBS at balance price to avoid its collapse in the middle of banking crisis
Credit Suisse has come to an end. Its main rival, UBS, has confirmed on Monday that it has concluded the acquisition process that started last March as a result of the financial turbulence that put the entire global banking system on tenterhooks. The shares of the new giant rose 0.6% at the start of the session.
"This is the beginning of a new chapter for UBS and for the global financial industry," UBS Chairman Colm Kelleher and CEO Sergio Ermotti said in an open letter to the press announcing the legal closing of the transaction.
"We will combine the skills, scale and wealth management leadership of UBS and Credit Suisse to create an even stronger integrated financial institution. We know we will face challenges. But we also know that great opportunities will present themselves," they add.
As agreed, Credit Suisse shareholders have received one UBS share for every 22.48 shares held. The rescue agreement agreed on March 19 raised the amount of the operation to more than 3,000 million Swiss francs (3,090 million euros).
Following the closing of the merger, Credit Suisse shares will leave their place on the selective Swiss Market Index (SMI) of the Zurich Stock Exchange to those of the Swiss logistics and transport group Kuehne + Nagel, which will start trading on the index from June 13.
"I am pleased that we have successfully closed this crucial transaction in less than three months, bringing together two global systemically important banks for the first time," said Colm Kelleher, Chairman of UBS. "We are now a Swiss global company and, together, we are stronger," he added. "Instead of competing, we will now come together as we embark on the next chapter of our joint journey," added Sergio Ermotti.
As agreed in March, last Friday, the Government of Switzerland and UBS signed an agreement whereby the public coffers will cover up to 9,000 million Swiss francs (9,256 million euros) in possible losses of a portfolio of Credit Suisse assets once the acquisition is completed.
Specifically, the public guarantee will take effect "only if the losses arising from the realization of these assets exceed 5,000 million Swiss francs (5,142 million euros)" and will be limited to a maximum of 9,000 million francs.
UBS will bear the impact of the first CHF 5 billion of potential realized losses on a designated portfolio of Credit Suisse secondary assets, equivalent to approximately 000% of the merged bank's combined assets and comprising primarily loans, derivatives, legacy assets and structured products from Credit Suisse's non-core unit.
As UBS explained in early May, once the legal closing of the Credit Suisse acquisition is completed, it will merge with UBS Group AG (UBS) and the combined entity will operate as a consolidated banking group, although UBS AG and Credit Suisse AG will continue to operate independently for the foreseeable future and UBS will carry out a phased integration.
Pending further integration, Credit Suisse AG will continue to rely on its established risk control and governance frameworks, although some new policies will be implemented to ensure UBS Group has effective oversight.
The combined entity will operate with five business divisions, seven functions and four regions, in addition to Credit Suisse AG and each will be represented by a member of the Group's executive board, all reporting to UBS CEO Sergio Ermotti.
Charges and red lines
Ulrich Körner, who previously worked at UBS and was currently CEO of Credit Suisse AG, will become a member of the UBS Group's executive board once the transaction closes.
Todd Tuckner, currently Chief Financial Officer and Head of Risk Management for Wealth Management, would be appointed Group Chief Financial Officer upon closing of the transaction and became a member of UBS's executive board with immediate effect, following Sarah Youngwood's decision to leave the firm after the transaction closes.
In addition, subject to regulatory approval, the board of directors of Credit Suisse AG will consist of Lukas Gähwiler (Chairman), Jeremy Anderson (Vice-Chairman), Christian Gellerstad (Vice-Chairman), Michelle Bereaux, Mirko Bianchi (until 30 June 2023), Clare Brady, Mark Hughes, Amanda Norton and Stefan Seiler.
However, as part of the merger, UBS has imposed strict restrictions on Credit Suisse bankers, including banning new clients from high-risk countries and on complex financial products, the Financial Times reports.
Prohibited activities include accepting clients from countries such as Libya, Russia, Sudan and Venezuela and launching new products without the approval of UBS managers.
Taken together, the list of constraints covers 11 financial risks and 12 non-financial risks and, while many of the risks are operational, in relation to issues such as the distribution of research and the use of offices, others affect areas of Credit Suisse's business more directly.
"We will never compromise UBS's strong culture, conservative risk approach or quality service," Colm Kelleher and Sergio Ermotti said in their open letter.
According to the criteria of The Trust Project