By Adria Calatayud


UBS Group said it has terminated an agreement with the Swiss government to cover some potential losses from its acquisition of Credit Suisse and a liquidity backstop from the central bank, as it moves forward with the integration of its former rival.

The Swiss banking giant said Friday that a 9 billion Swiss franc ($10.27 billion) loss-protection agreement and a CHF100 billion public-liquidity backstop guaranteed by the Swiss government have been voluntarily ended.

The measures were put in place in June ahead of the completion of the Credit Suisse deal and allowed UBS to clear the final hurdle to seal an acquisition forced on it by Swiss authorities after its smaller rival lost the confidence of clients and investors.

The termination follows an assessment of Credit Suisse's noncore assets that were covered by the agreement and the funding situation at Credit Suisse entities and the group overall, UBS said.

Credit Suisse also repaid an emergency liquidity assistance loan of CHF50 billion to the Swiss National Bank as of Thursday, with a risk premium of CHF476 million, UBS said.

The Swiss government separately said the termination of all federal guarantees in relation to the takeover of Credit Suisse by UBS means it and taxpayers will no longer bear any financial risks arising from the agreements. The state didn't have to assume any losses and earned receipts of around CHF200 million on the loss-protection guarantee and liquidity-assistance loans, the government said.

The measures were implemented to preserve financial stability under an emergency law which has now also become obsolete after the termination of the agreement, the government said.

The Swiss National Bank confirmed it had ended, at the request of UBS, the credit line it extended to Credit Suisse earlier this year.

"The targeted measures taken by the federal government, [Swiss financial regulator] Finma and the SNB to support the acquisition of Credit Suisse by UBS in March 2023 were necessary due to the acute crisis of confidence at Credit Suisse," the SNB said.

After a review of Credit Suisse's portfolio, UBS concluded the loss-protection agreement is no longer required, it said. The bank will pay CHF40 million to compensate the Swiss Confederation for the establishment of the mechanism, it said.

All loans to Credit Suisse under the public-liquidity backstop set up on March 19--which allowed the SNB to provide liquidity to the lender with the backing of the government--were repaid as of the end of May, UBS said.


Write to Adria Calatayud at adria.calatayud@dowjones.com


(END) Dow Jones Newswires

08-11-23 0210ET