UBS Seeks Government Backstop As It Rushes To Finalize Credit Suisse Takeover Deal As Soon As Tonight | ZeroHedge

So much can change in just 48 hours.

Late on Thursday, just hours after the SNB had launched the first (of many) bailout attempts of Swiss banking giant Credit Suisse, Bloomberg blasted the following headline:


This lack of enthusiasm by UBS to acquire its struggling rival of course forced the Swiss National Bank to front Credit Suisse a CHF50 billion credit line to hold it over for the next four days amid a furious bank run, one which we said would be woefully insufficient to restore confidence in the collapsing lender, and which we probably used up in just a few hours.

Then, late on Friday, both banks “unexpectedly” changed their minds and we got the following 180 degree U-Turn report from the FT:


So a deal is inevitable after all… but as always, there is a footnote one which we predicted yesterday when we said that a deal would only happen if the acquiring bank – in this case UBS – got a full central bank backstop.

That now appears to be the case with Bloomberg, Reuters and the WSJ all reporting that UBS is asking the Swiss government for a backstop to cover future risks if it were to buy Credit Suisse Group AG, after the Swiss National Bank and regulator Finma have told international counterparts that they regard a deal with UBS as the only option to arrest a collapse in confidence in Credit Suisse. The FT reported that deposit outflows from the bank topped CHF10bn ($10.8bn) a day late last week as fears for its health mounted.

According to the reports, UBS is discussing scenarios in which the government would take on certain legal costs and potential losses in any deal. Credit Suisse set aside SFr1.2bn in legal provisions in 2022 and warned that as yet unresolved lawsuits and regulatory probes could add another SFr1.2bn.

UBS also wants to be allowed to phase in any demands it would face under global rules on capital for the world’s biggest banks.

The backroom negotiations are taking place as the largest Swiss bank is exploring an urgent acquisition of all or parts of its smaller rival at the urging of regulators to halt a crisis of confidence, one which local authorities hope will be concluded on Saturday

Under one likely scenario, the deal would involve UBS acquiring Credit Suisse to obtain its wealth and asset management units, while possibly divesting the investment banking division, which has become the laughing stock on Wall Street after being one of the most iconic groups less than two decades ago. Talks are also still ongoing on the fate of Credit Suisse’s profitable Swiss universal bank.

According to the FT, the boards of the two banks are meeting this weekend as Credit Suisse’s regulators in the US, the UK and Switzerland are considering the legal structure of a deal and several concessions that UBS has sought.

UBS wants to be allowed to phase in any demands it would face under global rules on capital for the world’s biggest banks. Additionally, UBS has requested some form of indemnity or government agreement to cover future legal costs, one of the people said.

* * *

The time scale for agreement is fluid, according to Bloomberg which notes that the goal is for an announcement of a deal between the two banks by Sunday evening at the latest, while the Financial Times reported that a deal could emerge as soon as Saturday evening.

The Tribulation is commencing..

Please repent, carry your cross daily and accept the free gift of Jesus Christ’s Death on the Cross for payment for your sins.

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