The Swiss government has signed a deal with UBS that guarantees the bank giant indemnification for losses of up to $10 billion, which may arise from its takeover of its troubled rival Credit Suisse in March. In exchange for a one-off $44.3 million guarantee fee and an annual maintenance fee of 0.4% of the total guarantee limit, UBS will be indemnified for net losses exceeding $5.55 billion, to a maximum total of $9.98 billion, incurred when winding down Credit Suisse’s assets. This protection agreement ensures the government will shoulder a portion of losses when realizing Credit Suisse’s portfolio. The terms of the agreement apply only to a specific portfolio of assets equal to around 3% of the combined assets of the merged bank, primarily loans, derivatives, legacy assets and structured products from Credit Suisse’s Non-Core Unit. UBS can terminate the loss protection agreement at any time, but would no longer benefit from the federal loss protection.
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