UBS is to impose tight restrictions on Credit score Suisse bankers together with a ban on new purchasers 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 practically two dozen “pink strains” that prohibit Credit score Suisse workers from a variety of actions from the primary day the 2 banks are mixed, in response to folks with information of the measures.
Prohibited actions embrace taking over purchasers from international locations resembling Libya, Russia, Sudan and Venezuela and launching new merchandise with out approval from UBS managers.
Ukrainian politicians and state-owned enterprises will even be blocked to forestall potential cash laundering
“We’re frightened about ‘cultural contamination’,” UBS chair Colm Kelleher stated final month over taking over Credit score Suisse workers. “We’re going to have an extremely excessive bar for who we deliver into UBS.”
The prohibitions, written by UBS’s compliance division, are designed to cut back the chance of the transaction, which was orchestrated by Swiss authorities three months in the past to avoid wasting Credit score Suisse from collapse.
UBS executives worry they’re taking over a financial institution that has historically been rather more prepared to just accept dangerous purchasers and supply them high-stakes merchandise. Credit score Suisse’s ultimate few years as an unbiased firm have been marked by a sequence of scandals and crises, which one inner report stated have been a results of its “lackadaisical angle in direction of danger”.
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 federal government help would kick in after UBS coated the primary SFr5bn of losses.
The loss safety settlement was the ultimate hurdle for UBS to cross earlier than finishing the takeover.
The record of restrictions — which UBS executives have named “pink strains” — cowl 11 monetary dangers and 12 non-financial dangers.
Whereas most of the dangers are operational — regarding points such because the distribution of analysis and use of places of work — different decrees have an effect on areas of Credit score Suisse’s enterprise extra straight.
Beneath the foundations, Credit score Suisse bankers are unable to commerce in a variety of arcane monetary merchandise, together with Korean derivatives and choices of sure quantitative indices.
In 2006, Credit score Suisse misplaced $120mn on Korean derivatives, resulting in a shake-up of the unit’s administration group. However the financial institution has continued to function out there.
Credit score Suisse staff should additionally ask UBS executives for permission to increase loans backed by property resembling yachts, ships and actual property of greater than $60mn.
As banker to a number of the world’s richest folks, Credit score Suisse has lengthy supplied loans to fund billionaires’ personal jet purchases, whereas it has additionally engaged in yacht finance.
Final yr Credit score Suisse requested hedge funds and different traders to destroy paperwork referring to its richest purchasers’ yachts and personal jets following revelations within the Monetary Occasions of a securitisation deal involving loans it made to oligarchs who have been later sanctioned.
Employees at Credit score Suisse’s Swiss financial institution should ask permission from UBS to increase loans to debtors exterior the nation and for international property.
In an effort to restrict the chance of cash laundering, bribery and corruption, Credit score Suisse bankers are additionally barred from bringing on new purchasers from a variety of high-risk international locations. These embrace 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 score Suisse workers have been despatched a company-wide memo on Thursday, telling them to anticipate new “pink strains” on the day the deal closed, although the main points of the foundations was not included.
UBS and Credit score Suisse declined to touch upon the foundations.
Individually, Swiss parliamentarians on Thursday voted to empower a particular parliamentary fee of inquiry into the downfall of Credit score Suisse.
