September 14, 2023
Banking International

Credit Suisse bankruptcy could have collapsed Swiss economy, says Finance Minister

Swiss Finance Minister, Karin Keller-Sutter, has stated that if Credit Suisse had gone bankrupt, Switzerland’s economy would have likely collapsed. In an interview with Le Temps, she explained that the Swiss government acted in the country’s best interests by quickly arranging a takeover of Credit Suisse by UBS, its larger domestic rival.

The collapse of investor confidence in Credit Suisse on March 15th, amid fears of a global banking crisis, led to the government orchestrating a takeover before the markets reopened on March 20th. The Swiss central bank made liquidity available, and the government provided guarantees, totaling 109 billion Swiss francs ($120 billion).

Keller-Sutter emphasized that the government intervened to minimize the burden for taxpayers and the state. She further stated that without government intervention, there would have likely been a bankruptcy of Credit Suisse, followed by a probable collapse of the Swiss economy.

Credit Suisse was one of the 30 banks worldwide considered too big to fail and critical to the international banking system, similar to UBS. However, in recent years, it suffered a series of scandals, leading to it being seen as the weakest link in the chain after three US regional banks collapsed in March.

In a bid to prevent the bank from going bankrupt and causing a potential collapse of the Swiss economy, urgent talks were held between Credit Suisse and its larger domestic rival UBS. These talks took place at the finance ministry in Bern and resulted in a $3.25 billion deal being announced on the evening of March 19.

Swiss Finance Minister, Karin Keller-Sutter, attributed the potential bankruptcy of Credit Suisse to a culture that had created the wrong incentives and led to numerous scandals over the years. When questioned about whether any executives would face legal consequences, she admitted that the matter was complex, and the priority at the moment was to complete the merger.

UBS announced on Wednesday that the takeover should be finalized within the next few months, creating a mega-bank with invested assets of around $5 trillion. The finance minister commented that it was too early to discuss the future structure of UBS.

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