Credit Suisse's 167-year history of independence ended as UBS announced the merger of the two banks. The process of integrating the former competitors will involve significant layoffs. The Swiss government mediated an agreement in March, expected to benefit UBS with potential returns in the tens of billions of dollars. However, there are potential costs involved, including markdowns of Credit Suisse assets and legal and regulatory expenses. After discussions with the Swiss government, UBS finalized the deal, securing a 9 billion Swiss franc ($10 billion) assurance against losses from Credit Suisse assets.

Sergio Ermotti, CEO of UBS, faces the challenge of merging two banks with overlapping activities and deciding which ones to eliminate. At the same time, government officials are determining the merged entity's liquidity, capital requirements, and risk-weighted asset proportions.

The Swiss government agreed to protect the merged banks from losses on a specific portfolio of Credit Suisse's assets, amounting to 3% of the combined assets after an initial 5 billion francs were absorbed.

Ermotti believes that the guarantee will not be necessary, but the state support will help UBS maintain public trust during the transition. Access to Credit Suisse's operations, including loan exposures and customers, will allow UBS to determine what should be included in the wind-down unit. The Swiss government and UBS have established a $10 billion loss guarantee arrangement.

UBS expects its CET1 ratio, a measure of financial stability, to remain around 14% for the rest of the year. They anticipate that a decrease in risk-weighted assets will balance out Credit Suisse's operating losses and restructuring charges.

UBS's stocks rose by 0.5% in Zurich. However, the increase in 2020 did not match the Stoxx 600 Banks Index's 8.5% rise. Starting Tuesday, Credit Suisse's shares will no longer trade, but the bank will continue operating through its branches and subsidiaries while further integration is pending.

UBS aims to reduce risk in its investment banking division and take over customer services from Credit Suisse. They will apply their own risk tolerance and rules for loans and clients in challenging areas. Some of Credit Suisse's customers may not be accepted by UBS due to disparities in risk tolerance, and the bank will evaluate staff based on a 'culture filter' to ensure compatibility.

As the agreement between UBS and Credit Suisse nears completion, UBS's "Clean Team" will conduct due diligence at Credit Suisse's offices to ensure compliance before finalizing the deal. UBS will decide on the Swiss domestic unit of Credit Suisse by the end of the third quarter.

In an open letter, UBS expressed its commitment to maintaining a strong culture, a conservative risk approach, and quality service, emphasizing that many stakeholders are relying on them to make the acquisition successful.

UBS is yet to determine the fate of the Swiss domestic business it acquired from Credit Suisse, which, despite the turmoil, has remained profitable and provided primary funding for Swiss households and businesses. Initially, UBS planned to integrate it fully but has since considered alternatives such as disposal or division.

UBS plans to integrate each of its business units and discontinue certain activities in a non-core unit by the end of the year. Credit Suisse faced struggles and executive missteps, including a spying episode and significant losses from the Archegos Capital Management debacle. Efforts to redirect the bank were unsuccessful, leading to client withdrawals in 2022 and early 2023.