Economist Aymo Brunetti warns urgently: “No other country faces as great a risk as Switzerland.”

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Credit Suisse should be liquidated, economics professor Aymo Brunetti (61) said in an interview with “Finanz und Wirtschaft” a year after the urgent takeover of UBS. It was a “first-class sin” for the federal government to risk taxpayers’ money so it could buy UBS’s crisis bank.

The CS takeover greatly undermined the credibility of the too-big-to-fail arrangement that had stabilized under Brunetti’s leadership in the wake of the financial crisis. The state of emergency act on March 19, 2023 showed that problems in large banks easily led to the implementation of the emergency law.

“We have to assume that UBS will slide too”

The new UBS is now extremely large in relation to the overall economic performance of the Swiss economy. “No other country in the world is exposed to greater risk than Switzerland.”

Brunetti says just because things are going well at the bank now is no guarantee of the future. “After the global financial crisis, CS management also said it was competent.” Looking back, we see that something like this could happen again at any time in the future. “Yes, with regulatory adjustments, we have to assume that UBS will also decline again at some point.”

Brunetti says UBS’s growth targets make him nervous. “The risk we all carry is increasing.”

State guarantee is an inappropriate subsidy

According to Brunetti, the fact that the state makes a profit by saving CS does not change the problem. “It’s like in a casino; Even if you win, the risk is too high. “We’re doubly lucky that the government rescue worked.”

Brunetti says that in both the bailout of UBS during the global financial crisis and the emergency sale of CS, no one in the market was willing to take risks at the moment when government guarantees were given. “This suggests an improper subsidy both times.”

Tighter capital regulations and resolution plan

With adjustments needed to the too-big-to-fail regulation, Brunetti is calling for tighter capital regulations for UBS, even if it hinders the bank’s growth. A convincing solution plan is also important. If the solution is again judged to be impossible, then Switzerland cannot be the home of a major global bank. “UBS’ headquarters should then be moved abroad.”

The possibility of nationalizing UBS in the event of a crisis is “no”. “If UBS were state-owned, there would be a risk of hundreds of billions of francs for taxpayers.” The market economy is designed to ensure that a company can fail. (gku)

Source :Blick