UBS in talks with Swiss authorities over Credit Suisse losses

UBS Group has said it is in negotiations with Swiss authorities over loss protections related to its takeover of Credit Suisse and its regulatory capital requirements.

This disclosure underlines how some aspects of the tieup between the two banks – arranged hastily in midMarch by the Swiss government to stave off a broader banking crisis – have yet to be ironed out.

The Swiss government agreed at the time to shoulder up to 9 billion Swiss francs ($9.9 billion) in potential losses from the deal and offered liquidity assistance of up to 100 billion Swiss francs.

However, a definitive loss protection agreement remains under negotiation, UBS said in a US regulatory filing on Tuesday. UBS said it expected the main terms of the loss protection agreement to be approved before the acquisition of Credit Suisse being completed.

The bank said it was also in talks with the Swiss regulator Finma about “certain prudential capital requirements, risk weighted assets measures, and other capital and liquidity requirements for the combined firm”, but did not expect those to be finalised before the deal closes.

UBS, the largest Swiss bank, has said it expects to complete the acquisition of Credit Suisse, which came to the brink of a collapse in March following a string of financial scandals and mismanagement, by early June.

Meanwhile, the Swiss Finance Ministry issued an order on Tuesday stating that Credit Suisse senior managers will have their outstanding bonus payments for 2022 either cancelled or reduced.

The order affects the top three levels of Credit Suisse management and follows public backlash against the bank’s employees receiving bonuses. The bank’s rescue was backed by about 260 billion Swiss francs of state funding and guarantees.

The ruling will affect about 1,000 employees, who will be deprived of payments totalling about 50 million Swiss francs to 60 million Swiss francs accrued up to the end of last year.

Executive board members will have their outstanding bonus payments up to the end of last year cancelled, while managers one level below will have their payments cut by half and those two levels below by 25 per cent, the ministry said.

The ministry also said Credit Suisse should look into potentially recovering remuneration already paid out to members of group management since 2019.

The ministry also said it had ordered UBS to design a pay scheme to incentivise staff responsible for selling off Credit Suisse assets to make the smallest possible losses on the sales.