UBS is to impose tight restrictions on Credit Suisse bankers together with a ban on new shoppers from high-risk international locations and on complicated monetary merchandise because it prepares to take over its ailing rival as early as Monday.
UBS executives have drawn up an inventory of almost two dozen “red lines” that prohibit Credit Suisse staff from a spread of actions from the primary day the 2 banks are mixed, in keeping with individuals with data of the measures.
Prohibited actions embody taking up shoppers from international locations reminiscent of Libya, Russia, Sudan and Venezuela and launching new merchandise with out approval from UBS managers.
Ukrainian politicians and state-owned enterprises can even be blocked to forestall potential cash laundering
“We are worried about ‘cultural contamination’,” UBS chair Colm Kelleher mentioned final month over taking up Credit Suisse staff. “We are going to have an incredibly high bar for who we bring into UBS.”
The prohibitions, written by UBS’s compliance division, are designed to cut back the danger of the transaction, which was orchestrated by Swiss authorities three months in the past to avoid wasting Credit Suisse from collapse.
UBS executives concern they’re taking up a financial institution that has historically been far more keen to simply accept dangerous shoppers and supply them high-stakes merchandise. Credit Suisse’s remaining few years as an unbiased firm have been marked by a sequence of scandals and crises, which one inner report mentioned have been a results of its “lackadaisical attitude towards risk”.
UBS finalised an settlement with the Swiss authorities on Wednesday that may present the financial institution with as much as SFr9bn ($10bn) to guard it from losses on the rescue. The authorities help would kick in after UBS lined the primary SFr5bn of losses.
The loss safety settlement was the ultimate hurdle for UBS to cross earlier than finishing the takeover.
The listing of restrictions — which UBS executives have named “red lines” — cowl 11 monetary dangers and 12 non-financial dangers.
While lots of the dangers are operational — regarding points such because the distribution of analysis and use of workplaces — different decrees have an effect on areas of Credit Suisse’s enterprise extra immediately.
Under the principles, Credit Suisse bankers are unable to commerce in a spread of arcane monetary merchandise, together with Korean derivatives and choices of sure quantitative indices.
In 2006, Credit Suisse misplaced $120mn on Korean derivatives, resulting in a shake-up of the unit’s administration staff. But the financial institution has continued to function available in the market.
Credit Suisse workers should additionally ask UBS executives for permission to increase loans backed by belongings reminiscent of yachts, ships and actual property of greater than $60mn.
As banker to among the world’s richest individuals, Credit Suisse has lengthy offered loans to fund billionaires’ non-public jet purchases, whereas it has additionally engaged in yacht finance.
Last yr Credit Suisse requested hedge funds and different buyers to destroy paperwork referring to its richest shoppers’ yachts and personal jets following revelations within the Financial Times of a securitisation deal involving loans it made to oligarchs who have been later sanctioned.
Staff at Credit Suisse’s Swiss financial institution should ask permission from UBS to increase loans to debtors outdoors the nation and for overseas property.
In order to restrict the danger of cash laundering, bribery and corruption, Credit Suisse bankers are additionally barred from bringing on new shoppers from a spread of high-risk international locations. These embody Afghanistan, Albania, Belarus, Burkina Faso, Democratic Republic of Congo, El Salvador, Eritrea, Ethiopia, Guinea, Haiti, Iraq, Kosovo, Kyrgyzstan, Libya, Moldova, Myanmar, Nicaragua, Palestine, Russia, South Sudan, Sri Lanka, Sudan, Tajikistan, Turkmenistan, Uzbekistan, Venezuela, Yemen and Zimbabwe.
Credit Suisse staff have been despatched a company-wide memo on Thursday, telling them to anticipate new “red lines” on the day the deal closed, although the small print of the principles was not included.
UBS and Credit Suisse declined to touch upon the principles.
Separately, Swiss parliamentarians on Thursday voted to empower a particular parliamentary fee of inquiry into the downfall of Credit Suisse.
