UBS Group AG decided to end an agreement with the Swiss government to cover losses it could incur from the rescue of Credit Suisse, in a sign that the stricken lender’s assets might be less troublesome than initially feared.
Switzerland’s biggest bank said Friday it will voluntarily terminate the 9 billion franc ($10.3 billion) Loss Protection Agreement with the Swiss government after stress-testing a portfolio of Credit Suisse non-core assets. UBS said it will terminate a liquidity backstop with the Swiss National Bank of up to 100 billion francs, according to the statement, adding that Credit Suisse also fully repaid emergency liquidity assistance.
The support had helped facilitate the takeover brokered by the government in March as Credit Suisse hurtled toward bankruptcy. UBS had pushed for protection from hard-to-predict losses from a set of its former rival’s assets it plans to wind down or sell.
Read More: UBS, Swiss Government Seal $10 Billion Loss Guarantee Deal
Under the terms, UBS was to assume the first 5 billion francs of losses, with the government stepping up to take on the next 9 billion. The portfolio of assets covered primarily loans, derivatives, legacy assets and structured products from Credit Suisse’s non-core unit.
The government had previously said it and the bank’s “priority” was to minimize losses and avoid using the loss backstop as much as possible.
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