UPDATE - Swiss government announces takeover of Credit Suisse by UBS

UPDATES WITH MORE DETAILS

By Timo Kirez

GENEVA (AA) - Credit Suisse, the major Swiss bank in deep trouble, will finally be taken over by its Swiss rival UBS.

This was announced by the Swiss government in a media release sent simultaneously with the start of a press conference on Sunday evening.

In an effort to reduce any risks to UBS, the federal government is also awarding UBS a 9 billion Swiss franc ($9.79 billion) guarantee to cover potential losses on certain assets UBS assumes as part of the deal, should any future losses exceed a certain threshold.

"The UBS takeover is the best solution to restore confidence, said Swiss President Alain Berset.

The head of the Swiss Finance Department, Karin Keller-Sutter said that a Credit Suisse failure would have had serious consequences in the Swiss economy.

The Swiss National Bank (SNB) has offered UBS a liquidity line of about $100 billion as part of the deal.

According to Thomas Jordan, the president of the SNB, Credit Suisse is a bank that is classified as "too big to fail" in the global financial system and in Switzerland. "Therefore, the rescue of Credit Suisse is central for the Swiss economy," Jordan said.

Initial talks between UBS and CS are said to have taken place as early as Wednesday. In total, there were four meetings in four days. There were also exchanges with the US and the UK, Keller-Sutter said. "Today, negotiations between UBS and CS were successfully concluded," she added.

The Swiss government regretted that CS was not able to overcome the difficulties itself. "We regret this not least because many thousands of employees are affected," Keller-Sutter said.

The private takeover of Credit Suisse by UBS, supported by government-guaranteed liquidity assistance, strengthened confidence in the financial system and created stability for the Swiss economy and the Swiss and international financial system, Keller-Sutter added.

All foreign regulators involved have deemed the Swiss authorities' action to be on target. This will also reassure the international financial markets, the head of the Swiss Finance Department added.

"This crisis hit us at the worst possible moment," Credit Suisse Chairman Axel Lehmann said.

He pointed out that the loss of confidence in recent days had shown him that Credit Suisse could not continue to exist in this way.

"The decision was not easy. There was no favorable choice," he said. However, he added, the solution presented was currently the best possible under the circumstances.

Colm Kelleher, chairman of UBS Group, is pleased with the deal. UBS plans to align Credit Suisse's investment strategy with its own "conservative investment strategy," he said.

In addition, Kelleher announced that Ralph Hammers will continue to serve as the bank's CEO. "The new UBS will remain solid as a rock," he added.

UBS is paying 3 billion Swiss francs ($3.23 billion) in UBS shares for the takeover of troubled Credit Suisse. CS shareholders receive one UBS share for 22.48 CS shares.