European authorities comment on liquidity measures underpinning UBS takeover of CS

ECB Banking Supervision, the Single Resolution Board and the European Banking Authority welcome the comprehensive set of actions announced by Swiss authorities and FINMA in order to ensure financial stability.

The resolution framework (RF) has established the order according to which shareholders and creditors of a troubled bank should bear losses. RF is a mechanism by which reforms recommended by the Financial Stability Board (FSB) after the 2008 financial crisis are being implemented in the European Union.

In particular, common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier 1 be required to be written down. This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions. Additional Tier 1 is and will remain an important component of the capital structure of European banks.

In a statement, Christine Lagarde, president of the European Central Bank, said: “I welcome the swift action and the decisions taken by the Swiss authorities. They are instrumental for restoring orderly market conditions and ensuring financial stability. The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, our policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”


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