(Original title: Switzerland spends 260 billion Swiss francs to bail out Credit Suisse, which is equivalent to 1/3 of the country’s GDP)
News from the Financial Associated Press on March 20 (edited by Xia Junxiong)According to media reports, as part of the UBS-Credit Suisse merger deal, the Swiss government and central bank will provide support of about 260 billion Swiss francs ($280 billion), which is equivalent to 1/3 of Switzerland’s GDP.
The Swiss government announced on Sunday that in order to rescue the troubled Credit Suisse, UBS will spend 3 billion Swiss francs to acquire Credit Suisse and assume a loss of up to 5.4 billion US dollars to avoid more market-shaking turmoil in the global banking industry.
Agreement documents show that the deal will involve substantial public support, including three working capital and loans, as well as the Swiss government’s commitment to absorb potential losses of up to 9 billion Swiss francs from the acquisition.
Credit Suisse said on Wednesday it would borrow 50 billion Swiss francs in loans from the SNB through a guaranteed loan facility and a short-term liquidity facility.
In addition, the SNB will provide emergency liquidity loans of up to 100 billion Swiss francs to the merged banks, which are protected in the event of a default.
The third part of support is to allow Credit Suisse to obtain another 100 billion Swiss francs through public liquidity guarantees, which are explicitly guaranteed by the Swiss government.
The support totals 259 billion Swiss francs, equivalent to a third of Switzerland’s economic output last year. Switzerland’s GDP last year was 7710 Swiss francs.
The collapse of Silicon Valley Bank in the United States has caused turmoil in the global banking industry, and Credit Suisse is the most affected bank. Unlike regional lenders such as Signature Bank and First Republic Bank, both Credit Suisse and UBS are among the 30 global systemically important banks closely watched by regulators.
The Swiss government warned late Sunday that Credit Suisse’s bankruptcy would ripple through the entire financial system. “The collapse of Credit Suisse would cause huge collateral damage to the Swiss financial markets, potentially affecting UBS and other banks, and global markets,” Swiss Finance Minister Karin Keller-Sutter said at a news conference.