UBS agreed to buy rival Swiss bank Credit Suisse for 3 billion Swiss francs ($3.23 billion) in stock and agreed to assume up to 5 billion francs ($5.4 billion) in losses, in a shotgun merger engineered by Swiss authorities to avoid more market-shaking turmoil in global banking.

The deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse from the Swiss central bank.

To enable UBS to take over Credit Suisse, the federal government is providing a loss guarantee of a maximum of 9 billion Swiss francs for a clearly defined part of the portfolio, the government said.

This will be activated if losses are actually incurred on this portfolio. In that eventuality, UBS would assume the first 5 billion francs, the federal government the next 9 billion francs, and UBS would assume any further losses, the government said.

Switzerland's regulator FINMA said that there was a risk that Credit Suisse could have become "illiquid, even if it remained solvent, and it was necessary for the authorities to take action".

Credit Suisse Additional Tier 1 shares with a nominal value of around 16 billion francs ($17.2 billion) will be written down completely after the Swiss government provided support for UBS' takeover of Credit Suisse, FINMA said.

"With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation," the Swiss central bank said.

Executives foreshadowed structural changes in the offing.

(Reuters)

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