Credit Suisse has taken a significant chunk of liquidity from the Swiss National Bank (SNB) in what appeared to be a bid to boost its cash reserves amidst the ongoing deal to merge with UBS. The move follows the SNB’s massive injection of liquidity into the embattled lender last week. Sight deposit data showed that total deposits held overnight rose to 515.1 billion Swiss francs ($554.35 billion) from 510.8 billion francs last week. Although Credit Suisse refrained from revealing the full extent of liquidity taken from SNB, it disclosed that it intends to borrow up to 50 billion Swiss francs from the central bank.
UBS Takes Over Credit Suisse Amidst SNB Support
UBS agreed to acquire Credit Suisse on Sunday for 3 billion francs and SNB’s 100 billion Swiss francs ($108 billion) in liquidity assistance. However, the Swiss Bank Employees Association has expressed concerns over the potential risk to jobs at Credit Suisse amidst the takeover. The association has called for an immediate creation of a task force that includes management and labor representatives to address the issue. It noted that the risk to jobs at Credit Suisse also poses a significant risk to the national economy.
Switzerland’s Government to Provide 9 Billion Francs Guarantee for UBS
Switzerland will grant a 9 billion franc ($9.7 billion) guarantee to UBS to cover potential losses related to its acquisition of Credit Suisse. The government’s guarantee will apply to a specific part of the bank’s business and will be activated if losses occur on the portfolio. UBS is expected to absorb the first 5 billion francs in losses, while the government will cover the next 9 billion francs. Any further losses will be absorbed by UBS.
In conclusion, Credit Suisse’s move to draw substantial liquidity from SNB appears to be a strategic measure to replenish cash reserves after the merger deal with UBS. Nonetheless, concerns over potential job losses at Credit Suisse amidst the acquisition have surfaced not just among employees but also among industry experts. Meanwhile, the Swiss Government’s 9 billion francs guarantee for UBS is expected to provide reassurance amid the massive deal.