Swiss regulators defend rescue of Credit Suisse via UBS deal
Swiss regulators said on Wednesday that a takeover of Credit Suisse by controversial rival bank UBS was the best solution with the least risk of escalating the wider crisis and significantly undermining Switzerland’s status as a financial center. defended the Credit Suisse bailout.
A merger was “the best option” and “minimized the risk of contagion and maximized trust,” said Urban Angern, CEO of the Swiss Financial Market Supervisory Authority (FINMA). Stated.
Ungern said the other two options, a Swiss government takeover or participation in Credit Suisse’s bankruptcy proceedings, have serious drawbacks.
Bankruptcy, which would allow the functional part of Credit Suisse to act as a Swiss bank only, would “damage its reputation”, he told reporters in the Swiss capital Bern. A temporary takeover by the Swiss government would have put taxpayers at risk of loss.
“It is easy to imagine what a devastating effect it would have had on Swiss private banking if a major Credit Suisse wealth management bank failed,” Ungern said. “Many other Swiss banks could face a bank run, much like Credit Suisse went bankrupt in the fourth quarter.”
Swiss officials, including FINMA regulators, rushed to coordinate UBS’s $3.25 billion acquisition of Credit Suisse on March 19. That’s because Credit Suisse’s stock price plummeted, prompting nervous depositors to withdraw their funds.
Officials feared the Credit Suisse turmoil could further disrupt global financial markets following the collapse of two US banks.
UBS Chairman Colm Kelleher has expressed confidence in the deal, hinting at the complexities of the first-ever merger of two “global systemically important banks” and saying the deal is expected to close in the coming months. rice field.
“While we have not initiated these discussions, we believe the transaction will be financially attractive to UBS shareholders,” he said at the bank’s annual shareholders’ meeting in Zurich on Wednesday. We are confident that we have made the right choice: By joining forces with Credit Suisse, we are increasing our scale and increasing our wealth management and asset management capabilities.”
Kelleher said it is expected to take three to four years to fully integrate the banks. UBS said Credit expects more than $8 billion in annual cost savings by 2027 after deeming part of its Swiss investment banking portfolio unnecessary.
UBS board has proposed a 10% increase to its 2022 dividend, bringing it to a total of $7.3 billion after recording a net profit of $7.6 billion last year, but it will reallocate shares for the acquisition and decided to “temporarily suspend” all stock repurchase programs, Kelleher said. .
Shareholders were unable to vote for a merger after the Swiss government passed an emergency ordinance to avoid it.
Kelleher confirmed to UBS shareholders that a government-organized deal prevented him from consulting with them before the acquisition was announced.
“We understand that not all UBS and Credit Suisse stakeholders are happy with this approach.
A day earlier, Credit Suisse shareholders aired criticism of lenders’ struggles in what appeared to be the final annual shareholder meeting of the 167-year-old Credit Suisse bank.
The world’s largest banks, including Credit Suisse and UBS, have emerged from international negotiations aimed at preventing a repeat of the 2008 global financial crisis caused by the failure of a globally connected US investment bank. , must submit an emergency plan to close in the event of bankruptcy Lehman Brothers.
FINMA’s Angehrn said such an emergency plan “would have achieved the immediate objective” of keeping payments up and supporting the Swiss economy.
“But the damage to Switzerland, to Switzerland’s reputation as a place to do business, to tax revenues and to jobs would have been enormous,” he said.
McHugh reported from Frankfurt, Germany