The Federal Reserve approved UBS’s application to acquire the U.S. subsidiaries of Credit Suisse Group, the central bank announced Friday.
UBS has agreed to provide the board with an implementation plan in relation to the acquisition of Credit Suisse’s New York City-based holding company. The plan, which will be updated quarterly, is intended to consider the combining of the U.S. business and operations of UBS and Credit Suisse while it will also “address UBS's obligations to comply with more stringent enhanced prudential standards, including liquidity standards”, the Fed said in a statement.
UBS had requested the Fed’s approval for the acquisition March 22 — just three days after the bank combination went public.
UBS will acquire Credit Suisse’s American business, including investment banking, private banking, corporate debt underwriting and asset management.
UBS’s U.S. operation will be boosted after the consolidation is complete and upgraded from Category II to Category III — a part of the Fed’s regulatory design, the Fed said.
Europe’s third-largest bank will have three months to come up with the implementation plan, while keeping in mind how it aims to adapt to the new regulatory and supervisory standards with the new categorization.
It will also need to outline the structural changes it plans to implement in its U.S. operation, such as branch closing, consolidation or maintenance, the statement said.
Until the consolidation process is complete, UBS has to maintain the two holding companies as separate and treat them accordingly, to ensure that all regulatory requirements are met, the Fed noted.
The U.S. central bank requires to conduct a review of bank mergers when a bank with more than $250 billion in assets wants to buy any voting shares of a company with $10 billion or more in assets, according to Reuters.
UBS Americas Holding, the U.S. subsidiary of UBS, has roughly $202 billion in assets under management, making it the nation’s 22nd-largest bank holding company, according to the Federal Financial Institutions Examination Council.
Following the approval, UBS can retain the assets it received from Credit Suisse Holdings USA under a separate holding company for around a year. But it needs to be consolidated thereafter, the statement highlighted.
The Credit Suisse assets, which UBS will acquire as part of the lender’s U.S. subsidiaries, account for over $57 billion, according to the FFIEC.
The $3.25 billion Swiss government-orchestrated combination of the two banks last month stood as a bid to rescue Credit Suisse from potential collapse.
However, the Swiss parliamentary last week voted against state guarantees for UBS’s bid for Credit Suisse. The government has argued the state’s $122 billion in guarantees in UBS’s proposed acquisition of its rival bank would be binding, irrespective of the outcome of the vote, Bloomberg reported.
