UBS completes takeover of embattled rival Credit Suisse

The logo of the Swiss bank Credit Suisse (Keystone via AP)

UBS has said it has completed its takeover of embattled rival Credit Suisse.

The move comes nearly three months after the Swiss government hastily arranged a rescue deal to combine the country’s two largest banks in a bid to safeguard Switzerland’s reputation as a global financial centre and stave off market turmoil.

A statement from the bank said that “UBS has completed the acquisition of Credit Suisse today, crossing an important milestone”.

UBS said last week that it expected to complete the acquisition worth three billion Swiss francs (£2.63 billion) as early as Monday.

It is a pivotal moment for the two Zurich-based rivals, whose combination has raised concerns about thousands of expected job losses, drawn rebukes and lawsuits over the terms of the deal, and stirred fears about the impact of creating a Swiss megabank that would be too big to fail.

UBS CEO Sergio Ermotti said on Friday: “This is a very important moment – not just for UBS, (but) for Switzerland as a financial location and for Switzerland as a country.

“So we do feel the responsibility, but we are fully motivated.”

This morning UBS and the Swiss government signed a Loss Protection Agreement, effective upon completion of the acquisition of Credit Suisse, expected as early as 12 June 2023. Click through below on what that means. pic.twitter.com/XO9w5tH1Gf

— UBS (@UBS) June 9, 2023

Mr Ermotti, who returned to UBS to push through the deal, acknowledged that “the coming months will certainly be bumpy”, but added that the bank was “very focused on doing on it right”.

The Swiss government orchestrated the rescue of Credit Suisse over a weekend in March after the lender’s stock plunged and customers quickly pulled out their money, fearing its collapse could further disrupt global financial markets in the wake of the failure of two US banks.

The 167-year-old Swiss bank had seen a string of scandals over the years that struck at the heart of its business, ranging from bad bets on hedge funds to failing to prevent money laundering by a Bulgarian cocaine ring and accusations it did not report secret offshore accounts that wealthy Americans used to avoid paying US taxes.

UBS will inherit ongoing cases against Credit Suisse and the financial repercussions those entail, including a recent ruling in Singapore that said Credit Suisse owes former Georgian prime minister Bidzina Ivanishvili hundreds of millions of dollars for failing to protect the billionaire’s money in a trust pilfered by a manager.

Today, we cross an important milestone. We have announced the legal closure of our acquisition of Credit Suisse. For more details visit our hub here: https://t.co/ihrGDAgDJM and the media release here: https://t.co/YPj3sf8efG

— UBS (@UBS) June 12, 2023

Credit Suisse is appealing that and a similar case in Bermuda, where Mr Ivanishvili says a bank subsidiary failed to prevent “fraudulent mismanagement” of his assets in two life insurance policies.

Switzerland’s government has agreed to provide UBS with nine billion Swiss francs (£7.91 billion) in guarantees to cover any losses it may face from the takeover after UBS covers any hits up to five billion francs (£4.3 billion).

That emergency rescue plan is facing political pushback ahead of parliamentary elections in October.

Switzerland’s lower house rebuked it in a symbolic vote, and legislators have approved setting up an inquiry into the deal and the events leading up to it.

The Swiss attorney general’s office has already opened a probe.

Credit Suisse investors also have sued the country’s financial regulators after about 16 billion Swiss francs (£14 billion) in higher-risk bonds were wiped out.

The US Federal Reserve, the European Union’s executive branch and others worldwide have signed off on the takeover.

Credit Suisse was classified as one of 30 globally significant banks because its collapse posed a wider risk to the financial system.