Zurich (AFP) - The takeover of Credit Suisse by UBS will create a banking giant unprecedented in the history of Switzerland, where banking is a core part of the national identity.
Here are the main points of the deal worth three billion Swiss francs ($3.25 billion), which concluded on Sunday after intense negotiations involving the government, the financial regulators and the central bank.
Preserving financial stability
Credit Suisse, the country's second largest bank, has been in turmoil for two years and was one of 30 global financial institutions considered too big to fail.
"Its fate is therefore not only decisive for Switzerland, for our companies, for private clients, for its own employees, but also for the stability of the entire financial system," Swiss President Alain Berset said in unveiling the deal.
Finance Minister Karin Keller-Sutter said the bankruptcy of Credit Suisse could have caused "irreparable economic turmoil".
"For this reason, Switzerland has to take responsibility beyond its own borders," she said.
"The UBS takeover of Credit Suisse has laid the foundation for greater stability both in Switzerland and internationally."
A wealth management behemoth
UBS chairman Colm Kelleher said the merger boosted his bank's position as a global wealth management leader with more than $5 trillion in total invested assets.
"It will also reinforce UBS's position as the leading universal bank in Switzerland and further extend our position as the most important Swiss global bank," Kelleher said
UBS said in a statement: "The combination of the two businesses is expected to generate annual run-rate of cost reductions of more than $8 billion by 2027."
High-risk debt wiped out
The deal will be an all-share transaction, with Credit Suisse shareholders receiving one UBS share for every 22.48 Credit Suisse shares held -- equivalent to 0.76 Swiss francs per share -- well below Friday's closing price of 1.86 Swiss francs.
However, this takeover will not be subject to a shareholder vote, in accordance with an agreement reached with the Swiss authorities and other regulatory authorities.
The Competition Commission will also have no say in the exceptional merger between the country's two biggest banks.
Holders of high-risk debt at Credit Suisse are among the biggest losers in the deal, with Swiss authorities requiring that 16 billion francs in so-called additional tier 1 (AT1) bonds be completely written off.
"The takeover will result in a larger bank, for which the current regulations require higher capital buffers," FINMA said.
AT1 bonds were created following the 2008 global financial crisis to put the burden of losses on investors instead of taxpayers.
Deposits protected
"The merger is expected to be consummated by end of 2023 if possible," Credit Suisse said.
In the meantime, Credit Suisse will continue to implement its restructuring programme "in collaboration with UBS".
FINMA, the Swiss financial regulator, said all the bank's services would continue without interruption.
"This will ensure protection for depositors as accounts, security accounts and other services (counters, ATMs, e-banking, debit and credit cards) will likewise remain accessible as usual," it said.
Little on jobs
UBS will take over the wealth management, asset management and Swiss domestic banking at Credit Suisse, which encompasses its retail banking and loans to small and medium enterprises.
"UBS intends to downsize Credit Suisse's investment banking business and align it with our conservative risk culture," Kelleher said, referring to one of the riskier aspects of the Credit Suisse portfolio.
However, neither Kelleher or Credit Suisse chairman Axel Lehmann gave details of potential job cuts, although the intention is for the period of uncertainty to be as short as possible.
100 billion Swiss francs in liquidity
To facilitate the deal, the Swiss government granted UBS a guarantee of nine billion Swiss francs to assume potential losses arising from certain assets that UBS takes over.
The Swiss National Bank -- the central bank -- will also allocate significant aid to the two banks in the form of liquidity of up to 100 billion Swiss francs.
