“Credit Suisse is not a government bailout”

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Swiss National Bank’s (SNB) cash injection into Credit Suisse made international headlines and caused a sensation in Bern. Oswald Grübel, 79, who runs both UBS and CS, downplays current events: “Finma and Swiss National Bank’s action is incomparable to the UBS bailout in 2008. Credit Suisse is not a government savior,” said a briefing with Blick. in the interview.

That’s why Grübel sees it as a mistake to argue whether the “too big to fail” regulations introduced in the last decade have been ineffective. He is of the opinion that SNB is not doing anything out of the ordinary at the moment: “It provides CS alone with additional liquidity of up to CHF 50 billion. In doing so, the SNB is just doing its job: stabilizing the Swiss financial system.”

Real securities instead of poison papers

According to Grübel, additional liquidity was necessary because CS had lost a lot of client money in the last few months: “For example, anyone with a million in their account at CS bought securities worth 900,000 francs. Because in case of bankruptcy, the custody accounts will not fall to the bankruptcy desk and – unlike the account balances – will remain in the ownership of the owner.”

These additionally deposited or withdrawn funds are a big problem for CS. As a result, the bank lacks the necessary liquidity to cover outstanding receivables. That’s why the SNB has now stepped in. Grübel: “However, SNB takes collateral from CS for additional liquidity – collateral that is actually more valuable than the loan.”

This is a big difference from 2008: “At that time, SNB took over billions of toxic securities from UBS. It was also known that other large banks had such papers in their books.

“Silicon Valley Bank is an isolated case”

Grübel added that CS would normally also receive liquidity from other banks for the collateral that CS currently deposits in SNB. This is not the case at the moment because other banks don’t have much liquidity at the moment. “There is a lot of uncertainty in the markets in general right now. In this environment, the fact that CS has already gambled over the past few months and years is getting its revenge.”

In addition, Grübel, in an interview with Blick, states that the bankruptcy of Silicon Valley Bank, which triggered the current crisis, was an isolated case and did not reveal any systemic problems like it did in 2008. “Silicon Valley Bank had a fundamental design flaw: it focused on a single sector rather than diversifying its risks as widely as possible. This goes against all the principles and rules of risk management.”

This failure has nothing to do with CS and other banks. CS came into focus only because he had lost so much confidence beforehand. According to Grübel, the current administration, which has been in office for only a few months, is only partially responsible for this. “First of all, they need to clean up what their predecessors have done in recent years.”

Source :Blick