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Documents showed that the Swiss banks Credit Suisse and (UBS) could benefit from support to be provided by the state and the central bank to them by about 260 billion Swiss francs ($ 280 billion), which is a third of the country’s gross domestic product, after their merger to protect Switzerland from financial turmoil. Globalism.
And the Swiss authorities announced on Sunday that UBS agreed to buy its rival Credit Suisse in a strong merger aimed at avoiding further turmoil in the global banking sector.
UBS said it would pay $3.2 billion to acquire Credit Suisse, which was founded 167 years ago, while the government said UBS would also bear initial losses of $5.4 billion due to the liquidation of financial contracts and other assets. full of dangers.
However, the deal includes the provision of large financial support with the provision of three tranches of liquidity and loans, in addition to a pledge from the Swiss government to bear about nine billion francs of potential losses as a result of the acquisition.
The total subsidy of about 260 billion francs is equivalent to a third of Switzerland’s total economic output, which amounted to 771 billion francs last year.
In a note seen by Reuters and sent to employees on Sunday after the deal was announced, Credit Suisse assured employees that their bonuses would be paid in full.
Credit Suisse has already relied on a program of the Swiss National Bank that provides emergency liquidity.
Credit Suisse said last Wednesday it would take 50 billion francs from the program, which provides financing with collateral such as mortgages and securities. Banks can withdraw more of this financing as long as they have more collateral.
Monday’s SNB data indicated that Credit Suisse may have already benefited from the financing.
Moreover, the central bank offered the two banks, after their merger, a loan of about 100 billion Swiss francs as part of the emergency liquidity provision package. This loan is protected in the event of default.
The third tranche of support provided to Credit Suisse allows for the withdrawal of an additional 100 billion francs of financing through liquidity support, which is guaranteed by the Swiss government.
The Swiss Central Bank declined to comment on whether Credit Suisse or UBS benefited from the money offered.
Credit Suisse is the largest bank affected by the global market turmoil that resulted from the collapse of Silicon Valley and Signature banks in the United States.
Credit Suisse and UBS were also among a group of 30 important global banks that regulators are watching closely.
The Swiss government said Sunday that the collapse of Credit Suisse would cast a shadow over the entire financial system.
“The bankruptcy of Credit Suisse would have caused huge collateral damage to the Swiss financial market as well, in addition to the risk of the crisis spreading to (UBS) and other banks, as well as at the international level,” Swiss Finance Minister Karin Keller-Sutter told a press conference.