Federal Reserve approves UBS-Credit Suisse deal in US

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Federal Reserve approves UBS-Credit Suisse deal in US

3:40 CAT | 16 Apr 2023

FILE - Logos of Swiss bank UBS and Credit Suisse in Zurich, Switzerland March 20, 2023. [File photo: Reuters/Denis Balibouse]

The Federal Reserve’s Board of Governors on Friday said it has approved UBS Group AG’s acquisition of the U.S. subsidiaries of Credit Suisse, clearing the way for the Swiss-brokered deal in the U.S.

UBS has committed to give the U.S. central bank an implementation plan for combining its U.S. business and operations with those of Credit Suisse, the Fed’s Board said in a statement. The plan will include more stringent requirements including liquidity standards for the bank, due to the increased size of the institution, the statement said.

The U.S. central bank is required to conduct a review of bank mergers that would create an institution with total assets of more than $250 billion. The Fed’s approval of UBS’s application clears a key hurdle for the shotgun merger between the two banks orchestrated last month by the Swiss central bank.

After years of scandal and losses, 167-year-old Credit Suisse came to the brink of collapse before Zurich-based rival UBS rode to the rescue with a merger engineered and bankrolled by the Swiss authorities last month. UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.3 billion), a fraction of its earlier market value.

UBS has said it expects the deal to create a business with more than $5 trillion in total invested assets.

Under the takeover deal, holders of Credit Suisse AT1 bonds will get nothing, while shareholders, who usually rank below bondholders in compensation terms, will receive $3.23 billion.

The Fed subjects firms with more than $700 billion in assets, or more than $75 billion in cross-jurisdictional activities, to heightened supervision, including annual company-run stress tests and increased liquidity standards.

Source: Reuters