Credit Suisse failure ‘would have crashed Swiss economy’

Finance minister says government-brokered takeover by UBS was solely various to catastrophe

GENEVA: Switzerland’s finance minister says the nation’s financial system most likely would have collapsed had Credit score Suisse gone bankrupt.

In an interview with Le Temps newspaper, Karin Keller-Sutter mentioned the federal government had acted within the nation’s finest pursuits in swiftly arranging the takeover of Switzerland’s second-biggest financial institution by its bigger home rival UBS.

Amid fears of a world banking disaster final month, investor confidence in Credit score Suisse collapsed on March 15, with the federal government then orchestrating a takeover in the course of the weekend earlier than the markets reopened on March 20.

Some 109 billion Swiss francs ($120 billion) have been placed on the desk between authorities ensures and the liquidity made out there by the Swiss central financial institution.

“Given the circumstances, we acted as finest we might to minimise the burden for the state and the taxpayers,” Keller-Sutter mentioned.

“With out decided intervention by the authorities, the choice would have been a chapter of Credit score Suisse on Monday morning, accompanied by a possible collapse of the Swiss financial system.”

Like UBS, Credit score Suisse was among the many 30 banks worldwide deemed of world significance to the worldwide banking system and subsequently too huge to fail.

However it suffered a string of scandals in recent times, and after three US regional banks collapsed in March, it was left trying just like the weakest hyperlink within the chain.

Double-quick deal

The takeover talks have been unexpectedly carried out at Keller-Sutter’s finance ministry in Bern and the $3.25 billion deal was introduced on the night of March 19.

“The financial institution would have gone bankrupt on Monday, March 20. For what? As a result of through the years there was a tradition that appears to have created the fallacious incentives. As a result of there have been many scandals,” mentioned Keller-Sutter.

As for whether or not any executives can be delivered to justice, she mentioned: “It’s troublesome and complicated.”

She mentioned the federal government’s precedence was to finish the merger. UBS mentioned on Wednesday it ought to shut the takeover inside the coming months.

The finance minister mentioned it was too quickly to speak concerning the future construction of UBS, which is able to turn into a mega-bank with some $5 trillion in invested property.

Keller-Sutter mentioned the federal government must analyse what occurred in full, after which adapt the laws on banks thought of too huge to fail.

“However there are limits. Let’s not overlook that … confidence can’t be regulated.”