UBS Group AG has received approval from the US Federal Reserve to acquire Credit Suisse’s US subsidiaries. The deal, brokered by the Swiss authorities, will allow UBS to combine its US operations and business with Credit Suisse’s US subsidiaries. UBS sought approval on March 22, and as part of the agreement, it will provide an implementation plan to the Fed for the amalgamation within three months of closing the deal. 

The Fed has mandated that UBS provide a plan including liquidity standards and compliance with more stringent “enhanced prudential standards.” The UBS-Credit Suisse investment banking deal has strengthened measures because of the increased size of the institution.

As per US bank merger laws, the Federal Reserve must review bank mergers when a bank with more than $250 billion of total assets purchases any voting shares of a company with assets of $10 billion or more. Swiss authorities are primarily involved in the merger between the European nation’s banking giants, but the US central bank had to weigh in as each institution has American operations. The Fed’s decision cleared the way for UBS to acquire all US units of Credit Suisse.

Investor confidence in Switzerland’s largest bank, Credit Suisse, was shaken last month following the sudden collapse of Silicon Valley Bank based in the US. To curb further banking turbulence, Swiss authorities announced that Credit Suisse would be purchased by UBS, which had also almost collapsed. 

UBS agreed to acquire Credit Suisse for a significantly reduced price of 3 billion Swiss francs ($3.3 billion) compared to its previous market value. As per the takeover agreement, shareholders will be awarded $3.23 billion, while holders of Credit Suisse AT1 bonds will receive no compensation despite typically ranking below shareholders in terms of payment hierarchy.

Earlier this month, European Union antitrust regulators granted UBS temporary approval, but the bank still needs to obtain clearance under EU merger regulations. Meanwhile, according to a Reuters report, the Bank of England has reportedly approved the takeover in the United Kingdom. UBS anticipates the acquisition will result in a business with over $5 trillion in total invested assets.

UBS Chairman Colm Kelleher called the acquisition a significant milestone for Switzerland and the global financial industry but cautioned that it carries a “huge amount of risk.” The takeover will take at least three to four years, excluding Credit Suisse’s non-core investment bank portfolio, which will have more than $5 trillion in total invested assets.