© Reuters. FILE PHOTO: Federal counselor and head of the federal finance department Karin Keller-Sutter attends a news conference at Credit Suisse after the UBS takeover bid, in Bern, Switzerland, March 19, 2023. REUTERS/ Denis Balibouse
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ZURICH (Reuters) – UBS’s multibillion-dollar state-sponsored acquisition of Credit Suisse should proceed smoothly and without political obstruction, Swiss Finance Minister Karin Keller-Sutter said in an interview published on Saturday.
The Swiss parliament will hold an extraordinary session next week to discuss the emergency merger engineered by Swiss authorities after Credit Suisse nearly collapsed.
Nearly 260 billion Swiss francs ($287 billion) of liquidity support and state guarantees have been offered to support the acquisition and prevent a financial collapse that could have led to the bank’s uncontrolled failure.
“There is a merger agreement between UBS and CS, for its part, the cabinet has made a commitment to the national bank to provide liquidity to CS to ensure stability,” Keller-Sutter told the Finanz und Wirtschaft newspaper.
“The guarantee agreement with UBS is still being negotiated. In many committee meetings, I got the impression that the politicians definitely do not want to jeopardize the takeover,” he added.
“I don’t see any obstacles right now.”
Completing the merger was the top priority, said the minister, who defended government intervention last month, which critics said came too late and promised too much taxpayer support for a bank that paid billions in bonuses to executives.
“The main objective of the Federal Council was to ensure the stability of the Swiss economy and the Swiss financial center and to prevent an international financial crisis,” he said.
“Given the circumstances, it was and is the best possible option, which also represents the least burden on the state and the taxpayer,” Keller-Sutter said.
The new combined bank will have $1.6 trillion in assets, twice the size of the entire Swiss economy, and more than 120,000 employees. Keller-Sutter said that the structure of UBS would have to 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 Swiss Competition Commission can also make recommendations, the minister added.
The risks to the taxpayer were also acceptable, although the government could take up to 9 billion francs in losses suffered by UBS with the acquisition.
Keller-Sutter criticized the culture at Credit Suisse, which she said had set the wrong incentives and had failed to learn from previous scandals and lawsuits.
The minister also defended the zero amortization of the AT1 bonds, a controversial part of the bailout.
“These are high-risk bonds with high yields, sometimes above 9%,” Keller-Sutter said. “The prospectus for these bonds makes it clear that if a company requests indirect government help, it can be cancelled.”
Next week’s special parliamentary session was important, he added, and a good opportunity to get to the truth of the Credit Suisse debacle.
“At the moment, parliament can ‘only’ advise on the compromise credit, but it also has the opportunity to comment on the case and play an active role in the process.”
($1 = 0.9051 Swiss francs)
