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Swiss Taxpayers Spared From Funding UBS’ Rescue Of Credit Suisse

UBS to handle potential losses of CHF 5 billion, Swiss government to cover next CHF 9 billion.

Swiss taxpayers will not fund UBS Group’s (NYSE: UBS) rescue of Credit Suisse (NYSE: CS).

The bank, which has faced a political backlash against the deal, inked a loss protection agreement with the Swiss government, effective post-completion of the acquisition of Credit Suisse.

Logo Credit Suisse prior to the UEFA EURO 2024 qualifying round group I match between Switzerland and Romania on June 19, 2023, in Lucerne, Switzerland. (Harry Langer/DeFodi Images via Getty Images) 

UBS will handle potential losses of the first CHF 5 billion, and if the amount exceeds, the Swiss government will cover losses of the next CHF 9 billion related to the emergency takeover.

Credit Suisse was purchased by UBS in the wake of the banking collapse after Silicon Valley Bank fell after buying government bonds where interest rates had risen.

It is the only high proile bank abroad to avoid a collapse that included Signature Bank, First Republic Bank, and Silver Gate Bank that collapsed after being taken over by the Federal Deposit Insurance Corporation (FDIC).

The scale of potential state support for the shotgun marriage of the country’s two biggest banks has proved politically explosive and continues to draw criticism in the run-up to national elections in October, reported The Financial Times.

UBS executives also hope to not call on the government backstop when it publishes its second-quarter results on Aug. 31. Whether it will keep Credit Suisse’s domestic bank, another politically contentious decision, remains to be seen.

Separately, UBS is planning a U.S. recruiting spree for wealth managers. Some 50 financial advisers have been tapped from Bank of America’s Merrill Lynch unit, JPMorgan Chase’s recently acquired First Republic Bank, Citigroup, and Wells Fargo, in the first half of the year, reported Reuters.

Iqbal Khan, UBS’ president of global wealth management, told Reuters that investing in that business “is a top priority.”

UBS’ ranks of financial advisers in the U.S. have swelled by more than 25% in the last three years, the report added.

“Over the next 20 years, we’ll see the greatest transfer of wealth in history,” Khan added. “That presents a huge opportunity for us to serve a whole new generation of clients.”

UBS shares are trading higher by 0.69% at $20.41 premarket on Monday.

The new parent company of Credit Suisse has been cutting 30% of the workforce. UBS has been leaning towards integrating Credit Suisse’s domestic business.

Credit Suisse’s team in Qatar was hired by HSBC that included the hiring of the company’s president in Qatar Aladdin Hangari.

It was big blow for UBS with Hangari’s close relationship with the Qatar Investment Authority as one of the most important shareholders for the bank.

The bank provided services to Qatar’s wealthiest including former politicians and most important business executives.

Produced in association with Benzinga

Edited by Alberto Arellano and Joseph Hammond

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