Swiss National Bank has announced a loan it granted to bail out troubled bank UBS in 2008 has been repaid.
The development means UBS can now buy back the once-toxic assets taken out of the bank at the height of the financial crisis.
The assets, worth $38.7 billion at the time of the bailout, have since become profitable.
UBS, Switzerland’s biggest bank, has already said it plans to buy them back.
It described the buy-back as an “important step which will close this chapter in the firm’s history with a positive outcome”.
Swiss National Bank has announced a loan it granted to bail out troubled bank UBS in 2008 has been repaid
It would mark a significant milestone in the recovery of the bank, and Switzerland’s wider banking sector, following the banking crisis during which UBS came close to collapse.
In later 2008, the Swiss National Bank (SNB) was forced to set up a stabilization fund into which illiquid assets could be transferred.
The SNB said the price UBS will pay for the assets will be determined by a valuation from independent agents.
The fund’s equity amounted to $5.5 billion at the end of 2012.
Banks in Europe and the US are still recovering from the financial crisis, with bailout money still to be repaid and many governments still heavily invested in their banking sectors.
The European Central Bank said on Friday that banks would return a further 654 million euros in crisis loans issued in 2011 and 2012.
More than 1trillion euros was lent out by the bank, and more than a quarter has so far been repaid.
Ireland and Portugal are to be granted an extra seven years to pay back their emergency bailout loans.
The EU and the IMF bailed out the Republic of Ireland in 2010 and Portugal in 2011.
The eurozone agreed to the terms at a meeting of finance ministers in Dublin.
Meanwhile, the eurozone finance ministers also said a 10 billion euro ($13 billion) EU bailout loan for Cyprus was ready for approval by member states.
That could happen by the end of the month and, if the IMF also gives the go-ahead, the first bailout money could be released by mid-May.
The plan for Ireland and Portugal is intended to give the countries’ financial systems more time to recover from the debt crisis after their bailout loans run out.
Ireland’s bailout money will run out later this year, and Portugal’s will run out in 2014.
Ireland and Portugal are to be granted an extra seven years to pay back their emergency bailout loans
The Irish and Portuguese repayment extensions are expected to be backed by all 27 EU members, which includes those outside the eurozone, later on Friday.
Eurogroup President and Dutch Finance Minister, Jeroen Dijsselbloem, said the ministers in Dublin had commended Portugal on its success in implementing the bailout programme but “asked them to maintain the reform momentum despite the difficult economic and domestic conditions”.
He added: “Ireland is a living example that adjustment programmes do work, provided there is a strong ownership and genuine commitment to reforms.”
The deal could be seen as something of a reward “for good behavior”, but also as recognition that an austerity-first approach was not always the best option.
The extension is especially important for Portugal. When it received a 78 billion euro bailout two years ago, it pledged to take various measures in its budget to reduce public spending.
However, last week Portugal’s Constitutional Court ruled that several of these measures in the 2013 budget were unlawful.
If Portugal was to drop the measures because of this, it may not remain eligible for more funds under its bailout.
On Thursday, it emerged that Cyprus would need to raise an extra 6 billion euros to secure the 10 billion euro bailout from Brussels and the IMF.
While confirming that up to 10 billion euros in loans will be provided to Cyprus, the eurozone finance ministers also rejected reports that the country might be granted more financial assistance.
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Cyprus has told the European authorities that it intends to apply for financial assistance.
Cyprus is the fifth eurozone member to do so.
It said it needs help to shore up its banks, which are heavily exposed to the Greek economy.
The announcement came on another day of nervousness about the single currency.
Shares in Italy, Spain and Greece fell sharply amid concerns that an EU summit this week will again fail to produce a deal to shore up the euro.
The Spanish prime minister called for Thursday’s European Union summit to “dispel doubts” about the euro.
The Italian and Spanish indexes both closed about 4% down. The fall on Spain’s Ibex index was exacerbated by a Reuters report that the Moody’s credit rating agency is planning to downgrade Spain’s banks.
Earlier, Spain formally requested a bailout loan for its banking sector, expected to be for up to 100 billion Euros ($125 billion).
The country needs to find about 1.8 billion Euros over the next few days to recapitalize its second largest lender, Cyprus Popular Bank.
Cyprus has told the European authorities that it intends to apply for financial assistance
In a short statement, the government said that it required assistance following “negative spillover effects through its financial sector, due to its large exposure in the Greek economy”.
A government spokesman, Stefanos Stefanou, said the amount of European aid would be subject to negotiations in the coming days.
He said that despite the request, the Cypriot government would continue negotiations for a possible loan from a country outside the EU, such as Russia or China.
The country has already borrowed 2.5 billion Euros from Russia, whose business people are important customers of Cyprus’s relatively large offshore financial sector which offers low tax rates.
Its banks have lost large amounts on Greek government bonds. They are also facing big losses on loans made to businesses in Cyprus, which have been hard hit by the deep recession in neighboring Greece, its biggest trading partner.
Credit ratings agency Fitch said the country, which has a population of one million, would need 4 billion Euros to support its banks, the equivalent of almost a quarter of its GDP, or economic output, last year.
Earlier, it cut the Cypriot government’s credit rating to junk status, making it even harder for the country to raise the funds itself.
Fears are building that this week’s two-day European Union summit could prove inconclusive.
“We must dispel doubts over the eurozone,” said Spain’s prime minister Mariano Rajoy.
“The single currency is, must be, irreversible,” he said.
In another indication of the conflicts between European nations on the best way forward, Angela Merkel reiterated her opposition to calls to pool eurozone debt, which would make it cheaper for eurozone economies to borrow.
“There has to be a balance between guarantees and controls,” she said.
IG Index analyst Chris Beauchamp blamed Chancellor Merkel’s reluctance to share liability for eurozone debts for the share price falls.
“This was, is and will remain the fundamental issue in the crisis – Germany is understandably not keen on taking on the burden of debts built up by (as it sees it) spendthrift countries,” he said.
The problems facing Europe’s banks will be on the agenda at the summit of European leaders on 28 and 29 June.
Draft documents prepared for the meeting, which have been reported by news agencies, detail proposals for a single European banking supervisor and a common scheme for guaranteeing bank deposits.
There would also be a central fund to wind down bad banks.
Options for the regulator include having one body, possibly the European Central Bank, to oversee the continent’s biggest banks, while another watchdog supervises the day-to-day operations of all the banks.
The proposals also include closer fiscal union, with the prospect of eurozone countries sharing debt raised again.
