Credit Suisse to Face Operational Restrictions Until Close – UPDATE 1

According to a regulatory filing on May 16, Credit Suisse Group AG will not be able to operate until its takeover by rival UBS Group is completed. The company is currently facing certain limitations. Once UBS grants approval, Credit Suisse will be able to provide over CHF 100 million ($113 million) to investment grade borrowers or over CHF 50 million to non-investment grade borrowers. However, unreasonable lines of credit or credit cannot be granted. Furthermore, Credit Suisse cannot make capital investments that exceed CHF10 million or enter into specific contracts that exceed CHF3 million per year.

The filing also indicates that Credit Suisse cannot make “substantial modifications” to employees’ terms and conditions, including remuneration and compensation. UBS is presently in the process of consolidating its main rival following a government-led takeover in March. The bank has set aside a reserve of $4 billion for potential litigation and regulatory issues in preparation for closing the merger.

According to UBS, the Credit Suisse acquisition is estimated to have “negative goodwill” of $34.8 billion. It is essential for Credit Suisse to adhere to the restrictions set forth in the regulatory filing until UBS completes the acquisition.

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