Swiss government confirms financial commitment to Credit Suisse deal

Finance Minister Karin Keller-Sutter defending the UBS-Credit Suisse deal in parliament last week. © Keystone / Alessandro Della Valle

The parliamentary rejection of the state’s role in the bailout has “no legal effect”, the government said on Wednesday.

The cabinet saidExternal link it “acknowledged” parliament’s position on the issue, but added that it would have no impact on the CHF109 billion ($121 billion) state contribution to last month’s UBS takeover of Credit Suisse.

Last week, one of the two Swiss parliamentary chambers refused to back the state credit – CHF100 billion for the Swiss National Bank (SNB) and CHF9 billion for UBS – which the government had made using emergency powers.

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While the vote was widely seen as symbolic, some lawyers and politicians have since called for clarity in light of a 2010 law which states that such emergency decisions need the subsequent approval of parliament.

For the government however, the situation is clear: it received the necessary approval on March 19 from a six-member parliamentary finance delegation, at which point the state commitments vis-à-vis UBS and the SNB became legally binding.

This legal appraisal was also the basis of parliament’s decision, the government said.

Exceptional circumstances

It also reiterated that the last-ditch deal on March 19 was “necessary due to the exceptional circumstances and the high degree of urgency in order to avert a financial crisis and thus severe damage to the Swiss economy”.

“If non-approval of the credits by Parliament were to result in the Confederation having to fully or partially reverse commitments already undertaken, the Federal Council’s ability to act in times of crisis would be significantly impaired,” it wrote.

The government nevertheless said it would take parliament’s position into account in its future work and decisions.

“On the one hand, this applies to the negotiations with UBS on the guarantee contract,” it said. “But only to the extent that this does not jeopardise the takeover of Credit Suisse by UBS.”

Last month’s government-backed shotgun marriage between Switzerland’s two biggest banks saw Credit Suisse taken over by rival UBS for CHF3 billion. It was propped up with a total of over CHF250 billion in guarantees and support which has since drawn widespread criticism.