Federal Reserve gives nod to UBS acquisition of Credit Suisse

The Federal Reserve’s board of governors has approved UBS Group’s acquisition of the US subsidiaries of Credit Suisse, clearing another hurdle for the completion of the Swiss-brokered rescue deal.

UBS has committed to give the US central bank an implementation plan for combining its US business and operations with those of Credit Suisse within three months of consummating the deal, the Fed’s board said in a statement on Friday. The plan will include more stringent requirements including liquidity standards for the bank, due to the increased size of the institution.

The US central bank is required to conduct a review of bank mergers when a bank with more than $250bn of total assets purchases any voting shares of a company with assets of $10bn or more. UBS had requested the Fed’s approval of the merger on March 22, the Fed said.

After years of scandal and losses, 167-year-old Credit Suisse came to the brink of collapse before Zurich-based rival UBS rode to the rescue with a merger engineered and bankrolled by the Swiss authorities last month. UBS agreed to buy Credit Suisse for Sf3bn ($3.3bn), a fraction of its earlier market value.

The Swiss authorities and UBS have been racing to close the takeover of Credit Suisse within as little as a month, in an effort to retain the lender's clients and employees.

UBS secured a temporary approval from EU antitrust regulators earlier this month but still needs to seek clearance under EU merger rules. The Bank of England has approved the takeover in the UK, people familiar with the process said.

UBS has said it expects the deal to create a business with more than $5-trillion in total invested assets.

Under the takeover deal, holders of Credit Suisse AT1 bonds will get nothing, while shareholders, who usually rank below bondholders in compensation terms, will receive $3.23bn.

The Fed subjects firms with more than $700bn in assets, or more than $75bn in cross-jurisdictional activities, to heightened supervision, including annual company-run stress tests and increased liquidity standards.

Reuters