UBS seeks backstop in any Credit Suisse deal, asks Swiss govt to take on certain losses: Report

UBS Group AG is asking the Swiss government for a backstop if it buys Credit Suisse Group AG, a report said on Saturday. Bloomberg reported that UBS is asking the Swiss government to take on certain legal costs and losses of Zurich-based Credit Suisse.

The largest Swiss bank is exploring an acquisition of all or parts of its smaller rival at the urging of regulators to halt a crisis of confidence, Bloomberg reported earlier.

The 167-year-old bank is the biggest name ensnared in the market turmoil unleashed by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past week, forcing the Swiss bank to tap $54 billion in central bank funding.

To stamp out the crisis, Swiss regulators are encouraging UBS and Credit Suisse to merge but neither bank wants to do so. The regulators do not have the power to force the merger, sources told Reuters.

Under one likely scenario, the deal would involve UBS acquiring Credit Suisse to obtain its wealth and asset management units, while possibly divesting the investment banking division. Talks are still ongoing on the fate of Credit Suisse’s Swiss universal bank unit, which was the only one of the firm’s main divisions to make money last year, reported Bloomberg on Saturday.

A government-brokered deal would address a rout in Credit Suisse that sent shock waves across the global financial system this week when panicked investors dumped its shares and bonds following the collapse of several smaller US lenders. 

With inputs from agencies