Fed approves UBS acquisition of Credit score Suisse’s U.S. subsidiary

The Federal Reserve Board of Governors accredited UBS’s acquisition of Credit score Suisse’s U.S. enterprise on Friday afternoon.

The acquisition of Credit score Suisse’s New York-based holding firm is a part of UBS’s $3.25 billion acquisition of its distressed home rival. The mixture of the 2 banks was brokered by the Swiss authorities and the Swiss Monetary Market Supervisory Authority final month to preempt Credit score Suisse’s collapse.

UBS’s acquisition of Credit score Suisse got here at a tumultuous time within the world banking trade following the failures of Silicon Valley Financial institution and Signature Financial institution. Credit score Suisse had a protracted, well-documented historical past of regulatory issues and seemed to be at risk of collapse earlier than the deal was struck.

The Swiss Nationwide Financial institution supported the acquisition by offering liquidity to UBS on March 19. To assist facilitate the transaction and supply assist to different central banks all over the world, the Fed enhanced its greenback liquidity swap facility that very same day.

UBS’s acquisition of Credit score Suisse will lead to “extra stringent enhanced prudential requirements, together with liquidity requirements,” the Fed stated in a press launch issued Friday. 

UBS’s U.S. subsidiary, UBS Americas Holding, has almost $202 billion of belongings beneath administration, in line with the U.S. Federal Monetary Establishments Examination Council, making it the twenty second largest financial institution holding firm within the nation. 

As a part of its approval, the Fed will permit UBS to maintain the belongings from Credit score Suisse Holdings USA in a separate holding firm for one 12 months, after which they must be consolidated. These Credit score Suisse belongings complete greater than $57 billion, in line with the FFIEC.

Credit score Suisse’s Americas enterprise consists of funding banking, personal banking, company debt underwriting and asset administration. 

Following the consolidation beneath a single holding firm, UBS’s U.S. operation will likely be upgraded from Class III to Class II beneath the Fed’s regulatory tailoring guidelines. Such a change would convey with it necessities for annual company-run stress testing and “superior approaches” to risk-based capital necessities.

Upon completion of the deal, UBS could have three months to supply the Fed with a plan for the way it will adapt to the brand new regulatory and supervisory requirements that include the change in categorization. 

UBS’s implementation plan should additionally define the structural group of its consolidated U.S. operations, together with whether or not branches will likely be consolidated or closed. 

UBS will then have to supply quarterly updates to the Fed’s Board of Governors in Washington in addition to to the Federal Reserve Financial institution of New York on its progress in implementing the plan.

Till the belongings are mixed, UBS must deal with the 2 holding corporations as distinct entities and will likely be liable for guaranteeing that each meet all of the regulatory necessities, the Fed famous.