UBS ends loss protection deal agreed with Swiss government for Credit Suisse takeover

investmentweek.co.uk:

The loss protection deal marked the final step in UBS' takeover of Credit Suisse, which was completed on 12 June.

In a stock exchange notice today (11 August), the bank also said it no longer needs the public liquidity backstop — a liquidity assistance loan of up to CHF100bn from the Swiss National Bank, backed by the Swiss government. 

In a separate statement, the Swiss government said: «These measures, which were created under emergency law to preserve financial stability, will thus cease to exist, and the confederation and taxpayers will no longer bear any risks arising from these guarantees.»

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UBS said Credit Suisse has fully repaid the Emergency Liquidity Assistance Plus (ELA+) loan of CHF50bn to the Swiss National Bank.

The loss protection deal marked the final step in UBS' takeover of Credit Suisse. It was agreed on 9 June in an effort to protect the bank against losses accrued during the acquisition of its struggling rival. 

The $10.2bn assistance would have been triggered once UBS had covered the first CHF5bn of losses. The guarantee covered the CHF44bn portfolio of Credit Suisse assets that UBS plans to wind down, equivalent to 3% of the combined group's total assets.

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«At the time, this was deemed necessary to protect UBS against potential tail risks as there had been very limited time to review respective assets over the rescue weekend,» the bank said. 

«After reviewing all assets covered by the loss protection agreement since the closing in June and taking the appropriate fair value adjustments, UBS has concluded that the LPA is no longer required.»

The voluntary