The end of Credit Suisse

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UBS buys Credit Suisse for 3 billion francs. A bread with butter. And everyone nods off the deal, even though CS was still worth more than 7 billion on the stock exchange under the chairmanship of Axel Lehmann (64) on Friday. But fears of a global domino effect after the fall of the once-proud Zurich bank have silenced critics.

On the contrary: banking insiders report that pressure from abroad on the Swiss government increased towards the weekend. The Bundesrat apparently saw no other way out than to resort to the emergency law and allow UBS to buy CS at a one-off ridiculous price of 76 centimes per share plus guarantees.

Should losses result from the deal, UBS itself would have to be responsible for the first 5 billion francs, but the federal government would come second. He grants UBS guarantees of up to CHF 9 billion. The Swiss National Bank (SNB) and the federal government have also provided extraordinary liquidity support to CS and UBS totaling CHF 200 billion. Switzerland is thus making CHF 209 billion available for the CS rescue.

«I have a CS account myself»

Despite the billion-dollar support for the takeover, the federal government does not want to ban bonuses. Reason: the liquidity support from the SNB is not state aid.

“I myself have an account with Credit Suisse”, Finance Minister Karin Keller-Sutter (59) defended herself to the media. As a customer, she is happy that CS is not going bankrupt. Many other customers, both private and business customers, and the bank’s numerous employees should see that too. Nevertheless, the often petrified facial expression of the FDP federal councilor spoke volumes. Disappointment and shame that a Swiss bank had to be bailed out was written on her face.

Change in turbo law

Even if the CS solution does not seem perfect – and there are probably never perfect solutions in such a situation – the Bundesrat can also be somewhat proud that it was possible to save the big bank from bankruptcy. In the end, only a few days were left for the rescue. When the stock markets opened on Monday, the takeover had to be a done deal.

Events had rolled by over the past few days. From Wednesday evening it was clear: Credit Suisse is on fire. She asked the SNB for a liquidity injection. The state government then met on Thursday afternoon for the extraordinary meeting of the Federal Council. Even then, according to circles around the Bundesrat, the SNB and the financial market regulator (Finma) not only reported on the dramatic situation at CS, which had run into acute liquidity problems due to a huge outflow.

The deal closed on Thursday

According to information from Blick, it was already suggested at Thursday’s meeting that the CHF 50 billion liquidity injection would probably not be enough to restore confidence in Credit Suisse. A takeover by UBS was also discussed during the meeting on Thursday.

The Federal Council then met for its regular session on Friday. There the CS was again an issue. The Federal Council met again on Saturday evening for the crisis meeting. In the Bernerhof, the state government pushed for UBS to take over CS. Federal Council spokesman André Simonazzi (55) confirmed the meeting later in the evening, but remained silent about its contents. And as Blick reported, the Bundesrat met again on Sunday with the goal of getting the takeover dry before the Tokyo stock exchange opens at 1 a.m. Monday.

UBS, led by president Colm Kelleher (65), had already made it clear during the week that it had little interest in an acquisition. This should have prompted the Bundesrat to meet the large bank with guarantee obligations.

Bazaar through business media

Details of the negotiations have been repeatedly leaked to the public through the British business newspaper “Financial Times” and the US business service Bloomberg. It is clear that the two big banks tried to influence the course of the negotiations.

At the same time, the great interest from the Anglo-Saxon media shows how important the two banks are internationally. On the other hand, this also shows how little the big banks are tied to Switzerland. It took CS half a day on Thursday for the ad hoc announcement about the billion-dollar injection to be available in German, not just English. For some parliamentarians, this underlined how little weight the big banks attach to Switzerland.

Even before this weekend, criticism was voiced in Switzerland that ultimately the taxpayer would be responsible for the antics of the big banks. And this despite the fact that the “too big to fail” rules for systemically important banks dictate otherwise.

Why the taxpayer again?

But top parliamentarians quickly questioned whether the political sandbox games could be implemented in practice. The pressure from Great Britain and the USA that Switzerland had to have to save CS was too great. The Bundesrat defended itself that the applicable rules would not have been correct in this case. When it comes to big banks, only state aid seems to fit.

Source:Blick