HONG KONG – UBS will impose strict restrictions on bankers from Credit Suisse, including a ban on new clients from high-risk countries, according to a Financial Times report, with the two banks moving to close the historic takeover as soon as Monday.
A list consisting of almost two dozen “red lines” will prohibit Credit Suisse staff from a range of activities, a limitation meant to curb risk for UBS, the newspaper reported Sunday. Earlier, UBS chief executive officer (CEO) Sergio Ermotti said the firm is gearing up for a “bumpy” few months as it works on the complex integration.
In addition to prompting discussions around deep cuts to staffing levels and winding down riskier assets, the closing of the deal may lead to further departures of key executives as the management takes shape under Mr Ermotti.
UBS is grappling with how to swallow a smaller rival that has historically dealt with riskier clients and more exotic financial offerings that ultimately played a part in its downfall. Credit Suisse struggled to recover after billions in losses from Archegos Capital Management and other scandals. The lender was eventually rescued by UBS after massive outflows pushed the bank to the brink in March.
Other restrictions on Credit Suisse bankers will include a ban on launching new products without approval from UBS managers and a requirement that they seek permission to extend loans backed by assets such as yachts, ships and real estate of more than US$60 million (S$80.64 million), the Financial Times said.
Credit Suisse chief executive Ulrich Koerner has indicated to employees that the bank’s takeover by UBS will close on Monday, according to a memo seen by Bloomberg News. While the work that each employee does will not change substantially, there will be updated rules of engagement that “we must all follow,” he wrote. Spokespeople for Credit Suisse and UBS declined to comment on the memo.
UBS bankers assessing Credit Suisse’s business have already flagged concerns about some portfolios of loans in high-growth Asian countries as the firm decides which assets to tag for a wind-down unit, Bloomberg previously reported. The worries over lending relationships across traditionally high-risk markets including Indonesia, Vietnam, Malaysia and India could lead to the assets being runoff or sold, people with knowledge of the matter said.
While the banks’ combined balance sheet will amount to about US$1.6 trillion, UBS is aiming to cut that to US$1.35 trillion or US$1.4 trillion, Mr Ermotti has said. That is an increase of 35 per cent for UBS, which runs lower levels of risk than Credit Suisse, according to the CEO.
Meanwhile, UBS last week sealed an agreement with the Swiss government to cover 9 billion francs (S$13.31 billion) of losses it could incur from the rescue of Credit Suisse, clearing another last major hurdle to closing the takeover.
The accord will cover a specific portfolio of Credit Suisse assets, corresponding to about 3 per cent of the merged banks’ combined assets, the government said in a statement on Friday. That represents about 44 billion francs.
The deal removes one of the final blockages to the US$3.3 billion takeover. 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. With the government accord now in place, the merger is set to create a financial titan twice the size of the Swiss economy.