UBS halts government rescue payout

UBS, a prominent Zurich-based banking entity, has officially concluded the rescue initiatives that were established in collaboration with Swiss authorities to provide substantial financial support amounting to up to 200 billion Swiss francs (equivalent to approximately USD 230 billion). The purpose of these measures was to facilitate the successful acquisition of struggling rival Credit Suisse, thereby averting a potential global banking crisis.

The acquisition, which was finalised on June 12, prompted UBS to proactively terminate the rescue packages it had voluntarily undertaken. These programs were designed to absorb substantial losses and enhance liquidity for both UBS and Credit Suisse as they navigated the intricate intricacies of the merger.

In specific terms, UBS has successfully repaid 50 billion francs in loans to the Swiss National Bank and an additional 100 billion francs in liquidity assistance extended by the Swiss government. Additionally, a 9 billion franc “loss protection agreement” with the government has also been concluded.

The comprehensive effort by UBS also involved the disbursement of commitment fees and risk premiums totaling 730 million francs to Swiss authorities. This sum was distributed as 200 million francs to the government and 530 million francs to the national bank.

The merger itself was a hastily orchestrated move that unfolded in March, orchestrated in response to the potential collapse of Credit Suisse. The tumultuous situation at Credit Suisse, which ranked among the group of approximately 30 globally significant banks, contributed to apprehensions concerning worldwide financial markets earlier in the year. This unease was exacerbated by the failures of medium-sized banks within the United States. The crisis also cast a shadow over Switzerland’s esteemed reputation as a preeminent financial hub.

Throughout this process, Swiss authorities faced scrutiny from critics and skeptics who questioned the wisdom of taxpayer-funded support to expedite the consolidation of Switzerland’s most renowned private-sector banks.

In parallel, the Swiss National Bank issued a statement, detailing its own involvement in providing liquidity assistance. The total support extended by the bank to both UBS and Credit Suisse amounted to 168 billion francs. Notably, UBS still maintains outstanding obligations to repay certain loans.

The conclusion of these rescue initiatives marks a significant juncture in the evolution of these prominent Swiss financial institutions, with UBS taking decisive steps to bolster its position in a rapidly changing banking landscape.