Credit Suisse/UBS: all federal guarantees terminated
Bern, 11.08.2023 - UBS has definitively terminated the agreement regarding the federal loss protection guarantee in the amount of CHF 9 billion, as well as the agreement with the SNB regarding the federal guarantee of no more than CHF 100 billion to secure liquidity assistance loans. 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. Furthermore, the Confederation earned receipts of around CHF 200 million on the guarantees.
In March 2023, Credit Suisse was experiencing an acute crisis of confidence. The Federal Council, the SNB and FINMA therefore had to intervene in mid-March to protect the Swiss economy and avert damage. On 19 March 2023, the Federal Council adopted a package of measures that enabled the takeover of Credit Suisse by UBS. Thanks to the swift takeover by UBS and the accompanying government measures, it was possible for the financial system to be stabilised for the long term. The package of measures included, among other things, a federal loss protection guarantee for UBS in the amount of CHF 9 billion and a guarantee of CHF 100 billion in favour of the SNB to secure liquidity assistance loans to Credit Suisse.
Today, UBS announced with immediate effect that it would not be availing itself of the federal loss protection guarantee. At the same time, the agreement between Credit Suisse and the SNB on liquidity assistance loans with a federal default guarantee was also terminated without replacement. The termination of the federal loss protection guarantee and the liquidity assistance loans with a federal default guarantee is final. As a result, the emergency law for these two guarantees has also become obsolete.
The Confederation did not have to assume any losses arising from these guarantees. With the termination of these guarantees, the associated financial risks have also ceased to apply for the Confederation and taxpayers. Overall, the Confederation earned receipts of around CHF 200 million on the loss protection guarantee and liquidity assistance loans with a default guarantee.
To further promote financial stability, the Federal Council still intends to submit a bill to Parliament to introduce a public liquidity backstop (PLB) under ordinary law. In parallel, work is also continuing on the comprehensive review of the too-big-to-fail regulatory framework.
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