UBS has filed its response to the lawsuit brought by a group of shareholders on the price paid for Credit Suisse. This is reported to contradict what Finma and the Swiss National Bank had communicated just a few days earlier.
UBS has taken several months to reply to the lawsuit filed by mainly small shareholders of the former Credit Suisse. The issue at hand is whether they were given too little compensation in the compulsory merger with UBS.
The Swiss Investor Protection Association (Schweizerischer Anlegerschutzverein, SASV) confirmed in a statement over the weekend that its law firm received the «comprehensive response to the lawsuit» on February 16, 2024. The document runs to nearly 150 pages plus extensive annexes. «We will study these documents with our legal advisors over the next few days and give you a summary. This will take some time,» the letter to the claimants states.
In its lawsuit, the SASV wants to have the exchange ratio for the acquisition of Credit Suisse (CS) judicially reviewed.
Precarious Liquidity Situation
According to a report in «Sonntagszeitung», UBS lawyers talk in the letter of a «dramatic liquidity situation» at Credit Suisse Group (CSG) shortly before the takeover. The bank did not have enough liquidity in mid-March to meet the outflows caused by a fresh bank run.
The report says that the statements made in the response to the lawsuit contradict a previous statement by Finma and the Swiss National Bank (SNB) from March 3.
In their communication they say that CS met all the capital and liquidity requirements that systemically important banks have to meet. But according to the response to the lawsuit this was not the case. «CSG only met the capital requirements because of exceptions,» the letter says.
On the evening of March 15, 2023, CS no longer had any liquidity buffer and for it to access liquidity assistance it had to notify the National Bank that it could no longer refinance itself on the market.
Further Outflows Following SNB Liquidity Assistance
On March 16, the outflow of money from Credit Suisse stood at 17.1 billion Swiss francs. The Federal Council then passed the ordinance on additional liquidity assistance loans and the granting of federal default guarantees, which came into effect on the same day. But this was not announced and on the following day, Friday, March 17, a further 10.1 billion Swiss francs flowed out. CS then requested additional 20 billion in liquidity assistance from the SNB.
«The extent of these additional enormous outflows only became publicly known afterwards,» UBS lawyers write.
According to the response to the lawsuit, rating agency S&P planned to downgrade the CS rating to «junk status» with a negative outlook.
