UBS and Swiss government sign Loss Protection Agreement

The loss protection agreement will remain in effect until either all assets covered by the guarantee are realised, or until terminated by UBS.

The Swiss government has signed a Loss Protection Agreement (LPA) with UBS, which is set to come into effect following the completion of its acquisition of Credit Suisse.

UBS Group’s takeover of Credit Suisse Group is dependent on registration statement (share approval from the US Securities and Exchange Commission) and other closing conditions.

This loss protection agreement (LPA) reflects the terms of the guarantee, issued by the Swiss Federal Council on 19 March 2023. At the time, the Swiss National Bank said the takeover would “secure financial stability and protect the Swiss economy in this exceptional situation”.

The LPA will remain in effect until either all assets covered by the guarantee are realised, or until terminated by UBS the businesses confirmed in a statement today.

The agreement states that “the Swiss government guarantees losses of up to CHF 9 billion if realised on a designated portfolio of Credit Suisse non-core assets once UBS bears the first CHF 5 billion of any realised losses”.

In a statement, UBS established that it would manage the assets in “a prudent and diligent manner”, with the intention of minimising losses and maximise value realisation as far as possible. Additionally, the business agreed to cover both initial and ongoing external costs incurred by the Confederation and FINMA for the LPA.

UBS confirmed its intention to take over Credit Suisse in March, with the deal reported to be in excess of $3.25 billion.

Credit Suisse shareholders are set to receive one UBS share for every 22.48 outstanding shares held with UBS assuming responsibility for Credit Suisse’s obligations under its outstanding debt securities.

Once the transaction is completed, both Credit Suisse shares and American Depositary Shares (ADS) are set to be delisted from the New York Stock Exchange (NYSE) and the SIX Swiss Exchange (SIX).

The deal officially closed on Monday 12 June, with UBS set to assume all of Credit Suisse’s assets and liabilities as the entities merge into one consolidated banking group. 

Speaking in an announcement, Sergio P. Ermotti, chief executive of UBS addressed the new relationship between the banks following the completion of the transaction – highlighting that the former competitors are now moving forward united. He said: “Together, we’ll present our clients an enhanced global offering, broader geographic reach and access to even greater expertise. We’ll create a bank that our clients, employees, investors and Switzerland can be proud of.”