The Federal Reserve Board of Governors approved UBS's acquisition of Credit Suisse's U.S. business on Friday afternoon.
The acquisition of Credit Suisse's New York-based holding company is part of UBS's $3.25 billion acquisition of its distressed domestic rival. The combination of the two banks was brokered by the Swiss government and the Swiss Financial Market Supervisory Authority last month to preempt Credit Suisse's collapse.
UBS's acquisition of Credit Suisse came at a tumultuous time in the global banking industry following the failures of Silicon Valley Bank and Signature Bank. Credit Suisse had a long, well-documented history of regulatory problems and appeared to be in danger of collapse before the deal was struck.
The Swiss National Bank supported the acquisition by providing liquidity to UBS on March 19. To help facilitate the transaction and provide support to other central banks around the world, the Fed enhanced its dollar liquidity swap facility that same day.
UBS's acquisition of Credit Suisse will result in "more stringent enhanced prudential standards, including liquidity standards," the Fed said in a press release issued Friday.
UBS's U.S. subsidiary, UBS Americas Holding, has nearly $202 billion of assets under management, according to the U.S. Federal Financial Institutions Examination Council, making it the 22nd largest bank holding company in the country.
As part of its approval, the Fed will allow UBS to keep the assets from Credit Suisse Holdings USA in a separate holding company for one year, after which they will have to be consolidated. Those Credit Suisse assets total more than $57 billion, according to the FFIEC.
Credit Suisse's Americas business includes investment banking, private banking, corporate debt underwriting and asset management.
Following the consolidation under a single holding company, UBS's U.S. operation will be upgraded from Category III to Category II under the Fed's regulatory tailoring rules. Such a change would bring with it requirements for annual company-run stress testing and "advanced approaches" to risk-based capital requirements.
Upon completion of the deal, UBS will have three months to provide the Fed with a plan for how it will adapt to the new regulatory and supervisory standards that come with the change in categorization.
UBS's implementation plan must also outline the structural organization of its consolidated U.S. operations, including whether branches will be consolidated or closed.
UBS will then have to provide quarterly updates to the Fed's Board of Governors in Washington as well as to the Federal Reserve Bank of New York on its progress in implementing the plan.
Until the assets are combined, UBS will have to treat the two holding companies as distinct entities and will be responsible for ensuring that both meet all the regulatory requirements, the Fed noted.
