UBS-Credit Suisse merger was ‘best solution’ says Finance Minister

Finance minister Karin Keller-Sutter shook hands with Credit Suisse chairman Axel Lehmann at a press conference last Sunday announcing the CHF3 billion ($3.26 billion) takeover of the troubled bank by UBS. © Keystone / Peter Klaunzer

The Credit Suisse takeover by bigger rival UBS, with guarantees from the federal government, was the best option in the circumstances, says Finance Minister Karin Keller-Sutter.

“All other options were, in our opinion, riskier for the state, the taxpayer, the Swiss financial centre and the international markets,” she told the NZZ newspaper in an interview published on Saturday. Even if UBS “was certainly not in a weak position”, it did not dictate its conditions, she said.

Last weekend’s dramatic takeover of troubled Credit Suisse for a knockdown price under a government-backed deal has drawn public anger. A survey conducted by the gfs.bern research institute for the Swiss Broadcasting Corporation (SBC) – SWI swissinfo.ch’s parent company – published on Friday found that 66% of Swiss citizens are angry and 60% feel insecure following the bank rescue.

+ Read why a monster UBS bank scares Switzerland

Switzerland’s “too big to fail” law does not easily lend itself to the liquidation of a globally active, systemically important bank, according to Keller-Sutter. “In practice, the economic damage would be considerable, she says, and it was “clearly not the time to experiment”.

As for separating Credit Suisse’s Swiss entity from the rest of the group and keeping it as an independent bank, as proposed by her Radical-Liberal Party, she rejects this idea. “To jeopardise the negotiated takeover with new conditions and alter it at this stage would be very risky, with all the possible consequences for the Swiss economy and the international financial markets,” she says.

Keller-Sutter also told the NZZ that no pressure was put on Switzerland during the negotiations that led to the UBS takeover of Credit Suisse. “No one pushed us in any direction,” she says.

Public anger

As for public anger at a market economy in which big players are helped, Keller-Sutter says she understands it. “I too find it hard to accept,” she said, especially when management errors have led to such a situation. But such mistakes cannot be eliminated, and “I’m afraid the dilemma is not an easy one to solve”.

Keller-Sutter also rejects criticism that the regulatory authorities remained onlookers for too long in the debacle over Credit Suisse, which had been facing troubles for years.  The bank “has always complied with the regulatory capital and liquidity requirements”, the minister said. She stressed that she had informed the entire government of the emergency scenarios at the beginning of February.