Switzerland: Credit Suisse Emergency Liquidity Program, 2023

At the end of 2022, Switzerland had two global systemically important banks (GSIBs), Credit Suisse and UBS. As of December 31, 2022, CS had total assets of CHF 531.4 billion and total deposits of CHF 245.1 billion. This represented a decrease in total assets of CHF 224.5 billion and total deposits of CHF 166.6 billion compared to the end of the previous year (CS 2023d; SNB 2023f).

The SNB determined on Wednesday, March 15, that it would need to extend more liquidity to CS than the company could secure with its available collateral through the SNB’s existing standing facilities to ensure the bank could survive through the weekend. The next day, the Federal Council instituted two new facilities—the ELA+ and the public liquidity backstop (PLB)—through an emergency ordinance. The use of ELA+ before the weekend allowed CS to make it to the weekend. According to FINMA, CS’s liquidity position as of March 19 left it at the “point of nonviability,” despite its strong capital ratios, and FINMA would have implemented a single-point-of-entry bail-in resolution of CS, had the bank not agreed that day to merge with UBS (FSB 2023, 6). On Sunday, March 19, 2023, UBS announced it was taking over CS. Alongside the announcement of the UBS purchase of CS, the SNB officially announced the two new liquidity facilities, each of which could be drawn on for up to CHF 100 billion (Fuster and Müller 2023; SNB 2023a; SNB 2024).

The agreement for UBS to take over CS included a condition providing that if access to the PLB and ELA+ became unavailable and was not replaced before the closing of the transaction, UBS or CS could terminate the merger agreement. SNB Chairman Thomas Jordan said that “by making liquidity assistance available on an unprecedented scale,” the SNB both provided CS with time to find a solution and provided “significant support” for the UBS acquisition of CS—adding that the liquidity support remained “crucial” even after the merger announcement (Jordan 2023b, 2). The SNB reported that, along with the UBS acquisition and the government-provided asset guarantees, the ongoing liquidity provision was crucial to restoring market confidence as it ensured the market that CS would be able to continue to meet any demands on its liquidity (SNB 2024; UBS and SEC 2023).

SNB Vice President Martin Schlegel said in an interview in Neue Zürcher Zeitung that regulators never questioned the solvency of CS and noted that the bank met regulatory requirements for capital according to FINMA. Schlegel also said that, as lender of last resort, the SNB lends to solvent banks in emergency scenarios but that solvency must be confirmed by FINMA because the SNB is not a supervisory authority. The SNB’s guidance for its standing emergency liquidity facilities requires that a bank be systemically important and solvent and that the assistance be “fully covered by sufficient collateral,” as assessed by the SNB (SNB 2023d), to be eligible. The Federal Council’s emergency ordinance required that FINMA confirm either the solvency of the borrower or the implementation of a resolution plan among the conditions necessary for lending with the federal default guarantee, that is, under the PLB (Fuster and Müller 2023; SFC 2023a).

The Swiss parliamentary investigative commission report later revealed that, when amending the emergency ordinance on March 19, the Swiss Federal Council, the nation’s highest executive authority, had also considered adding an article to the emergency ordinance which would force CS to accept the merger with UBS. Ultimately, the Council decided against such a measure out of concern that a compelled merger would exonerate CS from liability. Also on March 19, the Federal Council drafted a proposal for the temporary nationalization of CS, which the financial authorities found to be less preferable to the takeover by UBS and likely to require the same emergency liquidity measures (Swiss Parliament 2024).

Marlene Amstad, chair of FINMA’s board of directors, said in a speech in April 2023 that on March 19, 2023, both resolution and bankruptcy plans were ready for signature and that FINMA was keeping as many options open as possible. Temporary nationalization of the bank was also an option at that point. The Federal Council viewed the temporary public ownership option as less preferable than a private takeover for a variety of regulatory, legal, and risk considerations. The Council also said the massive loss of confidence leading up to March 19 made it highly debatable whether a capital increase and restructuring of the bank under the bank recovery and resolution regulation adopted after the GFC could have restored confidence. The Council described bankruptcy as potentially hugely destabilizing even with the Swiss emergency plan meant to ensure continual operation of the domestic systemically important functions of the bank. Swiss authorities did not actively plan for a combined resolution and transfer to an acquirer; however, the Financial Stability Board (FSB) noted that, even in such a case, ad hoc SNB liquidity support would have still been necessary to cover liquidity outflows and help instill market confidence. The Report of the Expert Group similarly said that FINMA’s three options—resolution, public ownership, or merger with UBS—all would have required material SNB liquidity provision with the government providing guarantees for some of the SNB’s assistance (FDF 2023d; FDF 2023e; FINMA 2023d; FSB 2023).

In addition to the ELA+ and PLB facilities, CS and UBS had access to standing liquidity facilities, the ELA and LSFF. The ELA allows for borrowing against illiquid assets of the banking sector that can be legally transferred or pledged as collateral to provide liquidity via the ELA facility. The LSFF allows banks to borrow overnight against high-quality securities (that is, those eligible as collateral for SNB repurchase agreements, or repos) with the purpose of bridging surprise short-term liquidity issues such as delayed receipt of payments. The universe of eligible collateral is developed in dialogue with the SNB and reviewed on an ongoing basis. CS drew CHF 38 billion from the standing ELA facility and CHF 10 billion from the standing LSFF facility in March 2023 (SNB 2023a; SNB 2023d; SNB 2023f; SNB n.d.).

The federal government provided a loss guarantee of up to CHF 9 billion for UBS as part of the takeover of Credit Suisse wherein UBS agreed to take on the first CHF 5 billion in losses before relying on the guarantee. The protection covered a specific set of CS assets that “did not fit” UBS’s strategy and would apply only if UBS lost more than CHF 5 billion on the sale of those assets. The Financial Times reported that UBS negotiated the loss guarantee as part of the agreement to increase its purchase offer to USD 3.3 billion in stock from USD 1 billion (FDF 2023c; Morris et al. 2023).

The emergency ordinance from March 19, 2023, also authorized FINMA to order CS to fully write down additional Tier 1 (AT1) debt instruments and specified that the PLB assistance met the contractual conditions for doing so. CS had 13 contingent convertible bonds outstanding worth about CHF 16 billion, all of which could be written down to zero if bank capital fell below 7% of risk-weighted assets, known as a contingency event, or if measures to boost capital were deemed insufficient to prevent insolvency, known as a viability event. The terms of CS’s AT1 instruments specified that receiving extraordinary government support qualified as a viability event: As a result, FINMA considered the extension of the PLB line with the federal default guarantee to meet the contractual basis for writing down the AT1 instruments. Based on both the contractual provisions and the emergency ordinance, FINMA ordered CS to write down to zero approximately all CHF 16 billion worth of AT1 bonds, which eliminated the bank’s liabilities under the bonds and significantly raised the bank’s capital ratios (Benjamin and Vossos 2023; FINMA 2023b; FINMA 2023c; SNB 2023f).

Since March 2022, Switzerland’s Parliament had been considering a broad-based PLB program (with the federal guarantee) for the country’s large banks, but a decision wasn’t expected until mid-2023. SNB Vice President Martin Schlegel said that because the broad-based PLB plan required the approval of Parliament, it could not be used to address the CS crisis in a timely manner (Fuster and Müller 2023; Hughes-Neghaiwi 2023).

The Swiss Federal Council, the nation’s highest executive authority, made the decision to authorize both lines under emergency law and to provide the SNB with a federal default guarantee for the PLB loans. On March 16, 2023, the Council issued an emergency ordinance authorizing both ad hoc liquidity lines based on Article 184, Paragraph 3 and Article 185, Paragraph 3 of the Federal Constitution, which authorize the Council to issue emergency ordinances with a limited duration to safeguard the country against imminent threats to public order or stability. This allowed the SNB to create an ad hoc PLB facility for UBS and Credit Suisse without parliamentary action on the broad-based PLB proposal. While the Federal Council initially envisioned that the ELA+ would grant the SNB statutory liens on specific assets (which would have potentially had effects beyond Swiss borders); however, owing to the urgency of the CS crisis and the legal complexity of this proposal, the final ELA+ only provided the SNB with preferential rights in bankruptcy proceedings (SNB 2023f; Swiss Parliament 2024; The Swiss Confederation 2022).

The emergency ordinance was amended on March 19 when the Council added language relating to the loss-protection guarantee granted to UBS. In its March 19 press release, the SNB cited the emergency ordinance as the basis for both ad hoc liquidity programs. On March 29, Alain Berset, then president of Switzerland, released a supplementary document saying “the authorities were able to build on the work on the [PLB] announced by the Federal Council in March 2022”when authoring the emergency ordinance and would submit a bill to Parliament to replace the ordinance within six months (Berset and Thurnherr 2023, 9; SFC 2023a; SFC 2023b; SNB 2023f; The Swiss Confederation 2022).

The SNB acts as lender of last resort on the basis of Article 9, Paragraph 1, Section (e) of the National Bank Act, which says the SNB may “enter into credit transactions with banks and other financial market participants on condition that sufficient collateral is provided for the loans” (SFC 2021, art. 9). Article 5, Paragraph 2, Section (a) of the National Bank Act mandates the SNB to provide the Swiss franc money market with the necessary liquidity, and Section (e) tasks the SNB with contributing to the stability of the Swiss financial system (SFC 2021; SNB 2023c).

During a budgetary vote on April 11, the Swiss National Council, the lower house of the Swiss Parliament, voted against the ad hoc PLB facility for CS and the loss-protection guarantee for UBS. As a result of this vote, the default guarantee was formally rejected, despite its being already legally binding through the SNB. The Federal Council noted that the SNB had already committed the amounts authorized by the emergency ordinance, making the impact of the vote null, and that the vote was debated under the premise of it being nonbinding. Parliament also launched an investigation into the aid to CS, publishing the full report in December 2024 (FDF 2023b; Patrick 2023; Revill 2023a, 1; Swiss Parliament 2023; Swiss Parliament 2024).

The SNB provided the loans. In its emergency ordinance, the Federal Council set a maximum level of liquidity assistance loans payable by the SNB. Under this ceiling, the SNB was responsible for setting all other conditions for the loans (SFC 2023a; SFC 2023b; SNB 2023f).

The Federal Council issued the emergency ordinance authorizing the two ad hoc emergency liquidity facilities and decided to provide the federal default guarantee for the PLB facility. Per the emergency ordinance, three conditions needed to be met for the Confederation to grant a default guarantee: (a) significant harm to the Swiss economy and financial system could not otherwise be averted; (b) the liquidity assistance loans were deemed necessary to the continuity of the borrower; (c) FINMA had confirmed the solvency of the borrower or that a recovery plan had been implemented (FDF 2023a; SNB 2023a).

Additionally, under the emergency ordinance, ELA+ and PLB loans could be disbursed only when FINMA had confirmed to the FDF that the borrower had exhausted all other possible sources of financing. The SNB was also required to confirm with the FDF on the first disbursement of PLB that the borrower had no suitable collateral left to secure ELA or ELA+ (FINMA 2023e).

CS drew CHF 20 billion under the ELA+ facility on March 17, two days before the announcement of the ad hoc facilities. All liquidity assistance was provided immediately upon the bank’s request (SNB 2023f; SNB 2024).

Article 52 of the Banking Act requires that the Federal Council release regular reports on systemically important banks, the most recent of which was made publicly available in April 2024. At the end of March 2023, the Council decided to review the takeover and evaluate the too-big-to-fail framework (FDF 2023d; Swiss Federal Council 2024).

On April 5, 2023, Federal Department of Finance released a factsheet covering terms of the loans and default guarantee. It said the government considered any loss on the PLB loan to be unlikely. The factsheet also said that, in the event of losses, the federal government—as the guarantor, as opposed to the lender (the SNB)—would not have to bear them until the end of bankruptcy proceedings, which it said could take 10 years or more for a systemically important bank, and even then, the government would have five years to raise funds (FDF 2023c).

Legislators established a parliamentary commission to investigate the actions of regulators and public officials surrounding Credit Suisse’s failure and merger with UBS; the commission reported its findings publicly on December 17, 2024. Prior to the report’s publication, the government came under criticism in the media after announcing that the investigation’s files won’t be available for 50 years, rather than the usual 30 years (Revill 2023a; Revill and Janowski 2023; Swiss Parliament 2024).

In December 2023, FINMA issued a report on the “Lessons Learned from the CS Crisis,” reviewing FINMA’s actions and impact during the crisis and proposing amendments to its existing regulatory authority. These proposed amendments were under examination by the FDF and FINMA as of the report’s publication (FINMA 2023e).

The Federal Council’s report on banking stability from April 2024 includes three focus areas for improving the stability of the Swiss financial system: (a) strengthening the prevention regime (in other words, improvements to corporate governance and supervision, capital requirements, and early intervention strategies); (b) strengthening the SNB’s liquidity regime through the creation of a broad-based public liquidity backstop; and (c) expanding the government’s crisis toolkit (in other words, resolution planning) and increasing cooperation among FINMA, the SNB, and the FDF (SFC 2024).

CS issued a profit warning in June 2022 after reporting losses during two consecutive quarters. Following ratings downgrades, worsening macroeconomic conditions, and liquidity outflows in the latter half of 2022, CS announced a revised strategy that also failed to quell negative market rumors about the health of the bank. On March 9, 2023, CS announced a delay in the publication of its 2022 annual report owing to concerns regarding weaknesses in the bank’s financial accounting controls.

On Wednesday, March 15, the chair of Saudi National Bank, CS’s largest shareholder, said in a Bloomberg TV interview that the bank would not provide any additional capital to CS, noting that it could not do so without exceeding the regulatory threshold of 10%, which would have subjected the bank to additional controls. The SNB called this “probably the ultimate trigger” to the loss of market confidence in CS, reflected by a 24% decline in CS’s stock price over the same day (BIS 2023; CS 2023b; Gamal El-Din and Halftermeyer 2023; McCabe and Mitchell 2023; SNB 2023f, 38).

Also on that day, FINMA and the SNB issued a joint statement saying that CS still met capital and liquidity requirements and that the government was prepared to provide liquidity assistance to CS as needed. Early the next morning, CS announced that it would draw up to CHF 50 billion in ELA. Per the December 2024 parliamentary investigation report, CS included a specific amount of liquidity support in its press release to attempt to calm the market; however, Swiss authorities were surprised by this decision as the amount of liquidity could have been viewed as insufficient by market participants. Ultimately, according to the Bank for International Settlements (BIS), “these actions did not reassure the markets,” and large outflows continued (BIS 2023, 13–14). CS AT1 bonds fell from 72 cents on Tuesday to 31 cents on Wednesday and recovered to 35.5 cents only following the FINMA and SNB announcement (CS 2023c; Dow Jones 2023; FINMA 2023a; Kowsmann, Ostroff, and Patrick 2023; Swiss Parliament 2024).

On March 18, communications representatives for the Swiss financial authorities met jointly with liaisons from CS and UBS. In its conditions for accepting the merger, UBS listed official coordinated communication by the authorities, including a joint press conference with both banks. Those present at the meeting agreed that a press release regarding the merger should be ready in the event that a successful agreement was reached the following day and that the authorities and banks would coordinate further communications regarding the takeover (Swiss Parliament 2024).

On March 19, the SNB announced the two ad hoc emergency liquidity facilities, ELA+ and the PLB, alongside the announcement of UBS’s takeover of Credit Suisse. Per the parliamentary investigation report, the Swiss authorities had considered announcing the new ad hoc facilities in a separate press release prior to the merger agreement; however, they decided against doing so out of fear that markets would react negatively to the sole news that the previous lending to CS had been inadequate. The report also notes that CS wanted to announce its intention to repurchase USD 2 billion in AT1 bonds, but FINMA had prevented CS from doing so out of fears of contagion. That same day, the Federal Council held a joint press conference with representatives from UBS and CS, primarily in English. Per the spokesperson of the Federal Council, the authorities sought to inform the public of the terms of merger before the Asian stock exchanges opened and provide reassurance to financial markets and foreign authorities (SNB 2023a; Swiss Parliament 2024). 

The SNB's press release also cited the Federal Council’s emergency ordinance as the basis for the ELA+ and the PLB. The emergency ordinance is publicly available on the Federal Council’s website. The press release disclosed the size of the facilities and said that CS and UBS had access to the standing facilities, ELA and LSFF, as well. On March 29, the Federal Council released a public report to the Swiss Parliament detailing the motivations for the emergency ordinance and requesting support for its implementation (Berset and Thurnherr 2023; SFC 2023a; SNB 2023a; SNB 2023f).

The SNB detailed the usage of the ad hoc emergency liquidity facilities in its Financial Stability Report 2023, released on June 12, 2023. Both the vice president of the SNB and the chairman of the Governing Board of the SNB spoke publicly about the aid to Credit Suisse. The SNB’s interim report for the end of June 2023 disclosed some information about the interest earned on the loans (Fuster and Müller 2023; Jordan 2023a; SNB 2023e; SNB 2023f).

The SNB and UBS issued press releases on August 11, 2023, to disclose the repayments of both the ELA+ (August 2023) and the PLB (May 2023)—and the termination of the PLB arrangement and the CHF 9 billion loss guarantee. These included some information about the fees associated with the loans and with the federal guarantee. They also said UBS would continue to focus on the successful integration of CS and that the terminations of the loss agreement and PLB were voluntary (SNB 2023b; UBS 2023c).

The Federal Council’s emergency ordinance on March 16, 2023, gave CS immediate access to CHF 100 billion under the ELA+ (SNB 2023f, 23). The March 19 amendment to the ordinance meant a further CHF 100 billion could be lent under the PLB, which had the same bankruptcy rights, as well as a federal default guarantee to protect the SNB (SNB 2023f, 23, 38). The Financial Times reported that UBS negotiated for the CHF 100 billion PLB and government loss guarantee from the state in exchange for agreeing to pay a higher purchase price for CS (Morris et al. 2023, 8). The Federal Council set the maximum size for both the ELA+ and PLB liquidity lines (Fuster and Müller 2023; Morris et al. 2023; SNB 2023f).

CS drew CHF 20 billion from the ELA+ facility on March 17 and a further CHF 30 billion on March 20. CS drew an additional CHF 70 billion under the PLB on March 20. CS had also drawn CHF 38 billion from the standing ELA facility and CHF 10 billion from the standing overnight LSFF facility on March 16. The total liquidity assistance to CS peaked at CHF 168 billion (SNB 2023b; SNB 2023f).

The SNB and the Federal Council structured the liquidity assistance so that, in combination with the bank’s liquidity buffers, it would cover virtually all of CS’s short-term liabilities. The CHF 200 billion in available emergency liquidity was equivalent to more than one-quarter of Switzerland’s 2022 GDP, according to World Bank data. The SNB called the CHF 168 billion in total liquidity extended to CS “the largest amount of liquidity assistance ever provided to a single bank anywhere in the world” (SNB 2023f; SNB 2024; World Bank n.d.).

The SNB provided a significant amount of the liquidity assistance in foreign currency—euros and dollars. The SNB is able to access foreign currency by using its own reserves or by obtaining it through global markets; its swap lines with other central banks; and the Federal Reserve’s FIMA Repo Facility, which swaps US Treasuries collateral for dollars. (For more information of the FIMA Repo Facility, see Kelly [2023].) The SNB made the foreign currency available to CS through overnight swaps against the liquidity assistance provided in Swiss francs. The SNB reported that foreign currencies accounted for a large part of the amounts extended under ELA+ and the PLB (SNB 2023f; SNB 2024).

In May 2024, SNB Governing Board Member Antoine Martin reported that “almost half” the CHF 168 billion/USD 182 billion of liquidity assistance was provided in dollars (though the Swiss Parliament reported a higher figure). He also said the SNB sourced those dollars “mainly” through the Fed’s FIMA Repo Facility (Martin 2024). The Swiss parliamentary report notes the SNB had converted part of its foreign exchange reserves to cash as a precautionary measure. The SNB reported posting USD 75 billion of its US Treasury collateral to the FIMA facility, though the Fed’s weekly data does not show borrowing in excess of the FIMA facility’s USD 60 billion flexible cap, at least on the surrounding Wednesdays (when the Fed data is captured). Reuters reported the SNB borrowing the USD 60 billion cap from the FIMA facility. The Swiss parliamentary investigation report notes that the CHF 48 billion of ELA borrowing included USD 8 billion in US dollars and EUR 2 billion. The CHF 50 of ELA+ borrowing included CHF 40 billion in US dollars, CHF 5 billion in euros, and CHF 5 billion in Swiss francs. The CHF 70 billion of PLB borrowing comprised CHF 45 billion in US dollars, CHF 5 billion in euros, and CHF 20 billion in Swiss francs. That is, the SNB provided a combined CHF 92 billion (USD 100 billion) in US dollars (FRBSL n.d.; Kelly 2023; Martin 2024; O’Donnell, Spezzati, and Martinuzzi 2023; Revill 2023b; Swiss Parliament 2024).

 As of May 31, 2023, CS fully repaid the PLB loans. CS fully repaid the ELA+ funds as of August 10 and terminated the PLB agreement on August 11. As of the end of the second quarter of 2023, the SNB had earned CHF 900 million in interest income from its loans to CS and UBS. As of March 22, 2024, CS had repaid loans to the SNB’s standing ELA facility, bringing the amount outstanding down from CHF 38 billion to CHF 19 billion (CS 2024, 59; SNB 2023b; SNB 2024).

The ELA+ loans and the PLB loans charged a premium of 3% over the SNB policy rate—which was then 1.5%—for a total of 4.5%. All of the interest on the ELA+ loans went to the SNB; the 3% premium on the PLB facility was split evenly between the SNB and the federal government. The interest was due monthly and calculated daily on the basis of outstanding loans. The interest rate applied only to funds drawn. SNB Vice President Schlegel said the rate had to be above the usual market rate but not so expensive that it stopped the bank from getting out of its problems. According to the Federal Council’s dispatch on the introduction of the PLB, the risk premium on these liquidity assistance loans was based on the costs to the Swiss Confederation and SNB associated with the default guarantee (Berset and Thurnherr 2023, 48; FDF 2023c; Fuster and Müller 2023).

For comparison, the ELA standing facility charged a premium of 0.5% over the policy rate for a total of 2%. Schlegel noted that this 0.5% premium was charged for normal ELA assistance and was not a risk premium (FDF 2023a; Fuster and Müller 2023, 12; Illien 2023).

The federal government also charged CS a 0.25% commitment premium on the CHF 100 billion federal guarantee as an incentive for UBS to terminate the agreement as soon the guarantee was no longer needed. This fee was to apply to the full CHF 100 billion—for an annual fee of CHF 250 million—regardless of the amount of funds ultimately drawn. The commitment premium did not have to be paid until the agreement was terminated and would be prorated if the facility were terminated in less than a year (see Key Design Decision No. 9, Loan Duration). The borrower was also responsible for third-party service costs incurred by the SNB or the Swiss government in connection with the PLB (FDF 2023c; SFC 2023a; Fuster and Müller 2023).

As of June 30, 2023, the SNB had earned about CHF 900 million from its secured lending and lending under emergency law. Through July 31, CS paid CHF 214 million in commitment fees for the default guarantee and interest on funds drawn under the PLB. CHF 61 million of that went to the SNB and CHF 153 million to the Swiss Confederation. CS also paid CHF 476 million to the SNB as interest on the ELA+ loan for a total of CHF 690 million in fees connected to the ad hoc emergency liquidity facilities (SNB 2023e; UBS 2023c).

According to the Federal Council, the SNB and FDF maintained separate and independent risk premiums. The Federal Council also said that the risk premiums were based on the SNB’s and FDF’s costs and on “the prevailing risk situation,” such as the financial condition of the borrower. It added that the SNB’s risk premium was on the SNB key interest rate. If the risk situation for a borrower changed, the SNB and FDF could adjust risk premiums without the consent of the borrower. However, the SNB was required to obtain approval from the FDF to make risk premium adjustments (FDF 2023a).

The SNB announced the liquidity facilities without a specified repayment date for amounts drawn. The emergency ordinance that authorized the ad hoc facilities, and thus the authority to lend under them, was set to expire on September 16, 2023, six months after it was established. The Federal Council intended to submit a bill to parliament before that date to replace the emergency ordinance and did so by submitting a draft amendment to the National Bank Act on September 6, 2023. A provision in the CS–UBS merger prospectus filed with the SEC said measures taken on the basis of the ordinance, including funds lent under the ELA+ and PLB, would continue to apply after the expiration of the ordinance, but new funds would not be available (Berset and Thurnherr 2023; SFC 2024; SNB 2023a; UBS and SEC 2023).

While the Swiss government emergency decree supporting the CS–UBS merger exempted the deal from needing either bank’s shareholder approval, the transaction remained subject to approval from other UBS governance bodies, which took three months to close the transaction. The FSB reported that government assistance was made available throughout the duration of these deliberations to maintain market confidence (FSB 2023).

As of May 31, 2023, CS fully repaid the PLB but still had CHF 50 billion outstanding under the ELA+. CS fully repaid the ELA+ funds on August 10 and terminated the PLB agreement on August 11 (SNB 2023b; SNB 2023f).

The chairman of the SNB’s Governing Board described the ELA+ as “going to the limits of what is feasible for the SNB” because bankruptcy rights were the sole source of security for the SNB (Jordan 2023a, 5). The FSB said that both the ELA+ and the PLB took “less collateral than would have been customary” under a typical GSIB resolution framework or international norms for emergency liquidity assistance (FSB 2023, 15).

SNB Vice President Schlegel stated that as of Wednesday, March 15, it was unclear to the SNB that CS would be able to post enough eligible collateral at the standing liquidity facilities to access sufficient liquidity to survive through the weekend, but “we couldn’t take that risk” (Fuster and Müller 2023, 8). The Federal Council’s emergency ordinance on March 16, 2023, gave CS and UBS access to CHF 100 billion under the ELA+ without having to deliver any collateral. The Federal Council then voted on March 19 to create the PLB, which provided access to a further CHF 100 billion without needing to post collateral. UBS reportedly negotiated the PLB, as well as the partial loss guarantee, in return for increasing its purchase price for CS. The Wall Street Journal reported that UBS demanded the PLB because it “couldn’t reliably value” CS’s assets in a matter of days (Fuster and Müller 2023; Morris et al. 2023; Patrick 2023; SNB 2023f).

The ELA+ was secured by preferential rights only in bankruptcy proceedings. The PLB was secured by preferential rights in bankruptcy proceedings and by a federal default guarantee. The bankruptcy rights meant that in the event of a bankruptcy, outstanding PLB loans would be in the second bankruptcy class. The claim would rank behind the first bankruptcy class, privileged liabilities such as social security contributions and privileged deposits^FUnder Article 37(a) of the Bank Act, privileged depositors include (a) client claims arising from banking or securities dealing operations that are booked or should be booked as liabilities from client deposits in the balance sheet and (b) medium-term notes booked as medium-term notes in the balance sheet that are deposited at the bank in the depositor's name (SFC 2012). but ahead of the third bankruptcy class—which comprises all other claims, including those of unsecured creditors (FDF 2023d; Hofmann, Reutter, and Stäubli 2015; Jordan 2023a; SNB 2023a).

Expectation, or even compulsion, of the merger with UBS may have also reduced the ultimate risk to the SNB; as the Report of the Expert Group noted, UBS’s taking over the loans upon completion of the merger “contributed to an additional reduction of the risk” to the SNB (FDF 2023e, 11). If the merger had not consummated, the SNB would have been protected by additional restrictions placed on CS’s balance sheet actions; see Key Design Decision No. 12, Other Conditions.

The loans to CS increased sight deposits—deposits that can be withdrawn without, or with a minimal amount of, notice—in Switzerland and increased the supply of liquidity in the Swiss franc money market. The SNB reported that the Swiss Average Rate Overnight (SARON) faced downward pressure “against the backdrop of the crisis at Credit Suisse” (SNB 2024, 58). It also reported that the liquidity assistance “resulted in a certain amount of downward pressure on money market rates” (Jordan, Schlegel, and Maechler 2023; SNB 2024, 64).

The SNB did not want aid to CS to influence its monetary policy stance. To keep the secured short-term Swiss franc money market rates close to the SNB policy rate despite the added liquidity, the SNB reduced the liquidity in the system through open market operations in SNB bills and repo transactions. The SNB reported using these sterilization tools for only “part” of the increase in sight deposits that resulted from the liquidity interventions. To accommodate the increased financial stress, the SNB offered shorter-maturity bills, which were then more attractive to investors given market conditions. The SNB reported that issuance of the short-maturity bills “contributed to conditions on the Swiss franc money market quickly returning to normal” (Jordan, Schlegel, and Maechler 2023; SNB 2024, 62).

The chairman of the SNB’s Governing Board said healthy banking sector competition helps changes in the policy rate flow through to interest rates and the economy. He discussed this in the context of the merger between UBS and CS, not specifically in relation to the loans (Jordan 2023a).

As part of the terms of the PLB outlined in the March 16 emergency ordinance, borrowers and their subsidiaries could not return capital to investors, grant loans to or repay loans from the owners of the parent company, or pay dividends or royalties to persons outside the borrower’s group. However, a March 19 update to the ordinance—motivated by UBS’s takeover of CS—included a paragraph that said such restrictions would not apply if the borrower was taken over by another entity (Swiss Parliament 2024, 349–350). The terms also said that the borrower and linked companies could not do anything that could jeopardize the repayment of the loan and interest. The same day as the amendment to the emergency ordinance was passed, UBS’s takeover of CS was approved by the boards of directors of both banks. In its announcement, UBS stated that the bank had obtained “pre-agreement” for the takeover from FINMA, the SNB, and the FDF (UBS 2023a). Per the emergency ordinance, the takeover could also be concluded without shareholder approval from both banks as FINMA had coordinated the merger. FINMA also had the ability to replace any or all bodies responsible for management and supervision and control (Berset and Thurnherr 2023; SFC 2023a; SFC 2023b).

As a result of the finished merger into one consolidated banking group, UBS Group AG managed two parent companies, UBS AG and Credit Suisse AG, each with its own subsidiaries, branches, clients, and counterparties. Credit Suisse Group AG’s shares were delisted, and the UBS board took overall responsibility for the consolidated group. As of May 31, 2024, UBS had completed the merger of UBS AG and Credit Suisse AG: Pursuant to the merger, Credit Suisse AG ceased to exist as a separate entity, and UBS AG assumed all of its rights and obligations (UBS 2023b; UBS 2024).