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Market outlook: Mr. Blocher, SNB had to provide CHF 50 billion to Credit Suisse this week because the big bank was no longer able to provide the liquidity it needed in the market. It seems like 14 years since the UBS recovery package, we haven’t made any progress.
Christopher Blocher: There are still banks that are too big to fail. In a free market economy this should not happen. Unfortunately, despite our best efforts, we have not succeeded in dividing large banks, ignoring individual pieces. However, the support of the Central Bank is not state aid. SNB only loaned CS 50 billion and took securities and mortgages as collateral. CS will one day have to repay such loans, including interest. My only fear is that it won’t be enough to regain trust.
If this isn’t a government bailout, then at least it’s a case of distorting competition. Every SME must ensure that its finances are under control and in liquidity. If a small regional bank can’t get a loan from the market, it too goes bankrupt. The big CS gets top support.
This is the result of “too big to fail”. A regional bank is not systemically important. By law, the SNB has a duty to ensure regular money transactions. The SNB credits CS and its management not for sympathy, but for selfish reasons: to prevent worse things for the economy.
Some say the SNB’s cash injection is just a drop in the bucket. Customer exits will continue and CS will need more support soon. How do you evaluate this?
Unfortunately, this cannot be ignored. But I can’t judge it from afar. For that you need insight into the bank’s books and customer response. The coming days and weeks will show whether SNB’s support is enough to regain confidence in CS.
Many see UBS takeover as the only way to get CS back on track.
The merger of UBS and CS would be a bad thing for the Swiss business, especially for bank customers. There are transactions that Swiss companies operating internationally can only make with a major bank, i.e. UBS or CS in Switzerland. When there is no more competition, companies are at the mercy of one bank.
Can you make a sample?
For example, while we were planning large investments abroad with Ems-Chemie, we received offers from CS and UBS bank in Switzerland, which have the capacity to do so. We can also ask a US bank. This competition forced banks to make the best possible offer, and the offer with the best terms won the contract. This was the case when I was an entrepreneur, and it should be so today and tomorrow. If we only had one big bank, there would be no competition anymore.
What is the alternative if CS can’t do it on its own? Takeover by a US bank?
A foreign bank takeover wouldn’t be bad in itself. Majority of CS is already in foreign hands. On the contrary, it is important that potential buyers are seriously interested in stabilizing the Swiss bank in the long term and regaining the trust of customers. Unfortunately, the current administration doesn’t seem to have any convincing ideas on how to achieve this. Most of the mistakes in CS were made in the last decade. It’s a dark episode.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
