Zurich, April 8 (BNA): Swiss Finance Minister Karin Keller-Sutter said in an interview published on the website UBS (UBSG.S) that the multi-billion dollar state sponsorship on Credit Suisse (CSGN.S) will go smoothly without political hurdles. Saturday.
The Swiss parliament is set to hold an extraordinary session next week to discuss the emergency merger engineered by the Swiss authorities after Credit Suisse nearly collapsed.
Almost 260 billion Swiss francs ($287 billion) of liquidity support and government guarantees were provided to support the takeover and avert a financial meltdown that could have been caused by the bank’s disorderly failure.
“There is a merger agreement between UBS and CS, for its part the government has committed the National Bank to provide CS with liquidity in order to ensure stability,” Keller Sutter told Finanz und Wirtschaft.
“The warranty agreement with UPS is still being negotiated. In several committee meetings, I got the impression that the politicians certainly didn’t want to jeopardize the acquisition,” she added.
“I don’t see any obstacles at the moment.”
The minister, who defended government intervention last month, said completing the merger was a top priority, which critics said came too late and promised too much taxpayer support for a bank that paid out billions of dollars in bonuses for executives.
“The main objective of the Federal Council is to ensure the stability of the Swiss economy and the Swiss financial position and to prevent an international financial crisis,” she said.
“Under the circumstances, it was and remains the best possible option, and one that also places the least burden on the state and taxpayers,” Keller-Sutter said.
The new combined bank will have $1.6tn in assets – twice the size of the entire Swiss economy – and more than 120,000 employees and Keller-Sutter said the structure of UBS should be considered in the future.
“UBS will have to hold more shares after the acquisition. This will force them to shrink,” Keller-Sutter said.
The minister added that the Swiss Competition Commission could also make recommendations.
The risk to the taxpayer was also acceptable – although the government could assume up to CHF9 billion in losses to UBS because of the takeover.
Keeler-Sutter criticized the culture at Credit Suisse, which she said identified the wrong incentives and did not learn from past scandals and prosecutions.
The minister also advocated writing off AT1 bonds to zero, a controversial part of the bailout.
“These are high-risk, high-yield bonds, sometimes over 9%,” said Keller Sutter. “The prospectus for these bonds makes it clear that if a company claims indirect government assistance, it can be written off.”
She added that the special parliamentary session next week was an important and welcome opportunity to get to the bottom of the Credit Suisse debacle.
“At the moment Parliament can ‘only’ provide advice on the Obligation Credit, but also has the opportunity to comment on the issue and play an active role in the process.”
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