A week after the bank deal for the takeover of Credit Suisse (CS) by UBS, which came about under the direction of the Swiss government, the processing of the events is in full swing. Finance Minister Karin Keller-Sutter has already commissioned an initial analysis. The Swiss financial market supervisory authority Finma hopes for stricter instruments.
The Minister of Finance said in interviews over the weekend that one should not go back to business as usual and must also consider internationally how to deal with globally active banks in such situations. Last week she commissioned banking professor Manuel Ammann from the University of St. Gallen to carry out an analysis. In addition, she is considering making a corresponding application herself at the upcoming special session of Parliament. However, she spoke out against a parliamentary commission of inquiry (PUK) called for by several parties.
In interviews, the Finance Minister once again defended the takeover as the best of all solutions. A takeover by the state or a disorderly bankruptcy would have posed far greater risks for the state. That would have cost Switzerland’s economic output around 740 billion francs (a good 749 billion euros), she said. You had to prevent that.
For Keller-Sutter, the bank takeover arranged by the federal government and secured with collateral totaling CHF 209 billion is indirect state support. “You can compare it to insurance,” she said.
According to Keller-Sutter, CS has already claimed a large amount in the billions from the guarantee provided by the federal government and the National Bank. The money was needed because customers at home and abroad continued to withdraw money and because the counterparty, other banks, had asked for guarantees.
If further losses should occur due to the risk positions at Credit Suisse, a new decision would have to be made. It is regulated that UBS pays the first five billion and then the state provides a guarantee for the next nine billion francs. If this is not enough, which she hopes is not, then one would have to talk to UBS not only about the loss, but also about profit sharing. Because the papers could later yield profits again.
She warned against taking hasty steps when her party, the FDP, called for the Swiss business of Credit Suisse to be spun off in the course of the takeover by UBS. The priority now is to stabilize the situation. But she didn’t rule it out at a later date. Because UBS has every interest in shrinking.
“Ultimately it was a bank run, the bank ran out of liquidity,” said the President of the Financial Market Authority (Finma), Marlene Amstad, in the “NZZ am Sonntag”. She also defended herself against the accusation that Finma had remained inactive: “We intervened and used our strongest instruments. But especially when we act harshly, it usually doesn’t become public,” Amstad continued.
“Strategic misjudgments by the bank, management failure or losing the trust of customers and investors are not regulatory facts.”
FINMA is not a criminal authority, but is exploring the possibilities of holding today’s CS managers accountable, the FINMA President said. Whether new procedures would be opened is still open. However, the focus is clearly on mastering the transitional phase of integration into UBS and maintaining financial stability.
Finma can only intervene to a very limited extent against the bonuses, said Finma director Urban Angehrn in the “SonntagsZeitung”. “But we can expect that Parliament will now take up the issue.”
Amstad also welcomes the discussions about new intervention instruments: “Firstly, the power to fine, which most supervisory authorities are familiar with. Secondly, the so-called senior manager regime, which is about determining responsibilities,” said the Finma President.