Credit Suisse and UBS could benefit from more than $280 billion in state and central bank support as part of their merger to buffer Switzerland against global financial turmoil, documents outlining the terms of the deal show
UBS said it will pay $3.2 billion for the 167-year-old flagship while the government said UBS would also take on the first $5.4 billion in losses from unwinding derivatives and other risky assets.
The total of 259 billion francs of support is equivalent to a third of Switzerland's entire economic output, which stood at 771 billion francs last year. Credit Suisse said last Wednesday it would take 50 billion francs from the scheme, which provides funding secured against collateral such as mortgages and securities. As long as the bank has more collateral, it can draw down further such funding.On top of this, the Swiss National Bank offered the combined bank an emergency liquidity loan of up to 100 billion Swiss francs. That loan is protected in the event of a default.
UBS and Credit Suisse were both in a group of the 30 global systemically important banks watched closely by regulators. A failure by Credit Suisse failure would ripple throughout the entire financial system, the Swiss government said late on Sunday.
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