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As UBS finalizes Credit Suisse transformation, Swiss National Bank considers regulation

UBS was working on closing its merger with Credit Suisse by the end of May or early June

Thomas Jordan, chairman of the Swiss National Bank, has stated that there has to be a review of Swiss banking regulation and oversight following the collapse of financial giant Credit Suisse. However, he cautioned against “quick fixes.”

To prevent its collapse and facilitate its purchase by UBS, the central bank played a crucial role in the state-engineered rescue of the 167-year-old banking giant. It made 250 billion francs in emergency liquidity available.

Swiss emergency law was used to assure the distribution of emergency loans, a controversial policy that permitted the administration to bypass parliament.

At the SNB’s annual conference in Bern, Jordan said that “banking regulation and supervision will have to be reviewed in light of recent events,” referring to the Credit Suisse disaster.

“This will need a thorough analysis. However, there should be no quick remedies,” he continued.

According to his prediction, banks must keep enough assets to be provided as collateral to utilize the current liquidity facilities.

This would allow the central bank to offer liquidity without an emergency law.

According to Jordan, the central bank’s ability to assist under the so-called emergency liquidity plus (ELA+) scheme has reached its limit.

“By granting ELA+, we are pushing the SNB’s capabilities to their absolute limit, as the only security for this loan is preferential rights in bankruptcy proceedings,” he said.

Jordan insisted that the funds, of which 108 billion francs were infused in the first quarter, were not a gift to the banks and would need to be paid back – with interest.

Jordan also pointed out that Swiss inflation had risen to 3.2% in the first three months of 2023, above the SNB’s goal range of 0-2% for the previous year.

He remarked, “Prices went up more than we would have liked,” providing room for future interest rate increases.

“We stressed that we would continue to tighten monetary policy if necessary at our most recent monetary policy assessment in March,” the official concluded.

The development comes amid the UBS Group AG’s Chief Executive Sergio Ermotti shortlisting the Credit Suisse Group AG’s executives, who will most likely become part of the new management team, as per the media reports.

Dixit Joshi, chief financial officer, Francesca McDonagh, chief operating officer, and André Helfenstein, head of the Swiss business, are most likely to remain a part of the Swiss bank’s new executive team, as per reports.

UBS took over its rival for 3 billion Swiss francs (USD 3.37 billion) in March 2023, assuming up to 5 billion in losses as part of a deal hastily arranged by Swiss authorities

Recently, Ermotti said UBS was working on closing its merger with Credit Suisse by the end of May or early June.

The bank is also reviewing options for Credit Suisse’s Swiss unit, including keeping the unit’s investment banking operations while selling the rest, potentially in an initial public offering, as per a Reuters report.

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