BRUSSELS (dpa-AFX) - Swiss bank major UBS Group AG (UBS) announced on Friday that it has decided to voluntarily terminate the 9 billion Swiss franc Loss Protection Agreement or LPA with the Swiss government, saying it is no longer required.
As part of the Credit Suisse rescue by UBS, the Swiss government had entered into an LPA with UBS with effect from June 12 to cover losses of 9 billion Swiss francs only to be drawn after UBS absorbed the losses of the first 5 billion francs. This was aimed at protecting UBS against potential tail risks. After reviewing all assets covered by the LPA and taking the appropriate fair value adjustments UBS finds that the LPA is no longer necessary.
It has given a notice of voluntary termination effective August 11.
It will also terminate the Public Liquidity Backstop or PLB of up to 100 billion francs with the Swiss National Bank or SNB.
This decision comes following a comprehensive assessment of the designated portfolio of Credit Suisse non-core assets, including severe stress loss scenarios.
Additionally, Credit Suisse has fully repaid the Emergency Liquidity Assistance Plus loan of 50 billion francs to SNB as of August 10. It also paid a risk premium totaling 476 million francs to the SNB.
UBS in turn will pay a total of 40 million francs to compensate the Swiss Confederation for the establishment of the LPA.
Further to the rescue transaction, the Swiss government set up a PLB of up to 100 billion francs allowing the SNB to provide sufficient liquidity support to Credit Suisse, backed by a federal default guarantee.
All loans under the PLB were repaid in full by Credit Suisse as of the end of May 2023. After a comprehensive review UBS has decided to voluntarily terminate the PLB agreement with the SNB as of August 11.
On Thursday, shares of UBS closed at 19.41 francs up 0.44% on the Swiss Stock Exchange.
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