Green light for rescue Swiss credit. The Swiss Senate has approved this Tuesday the 109 million Swiss francs (110,553 million euros) that make up the credit package backed by the State to save the bank. With 29 votes in favor, six against and seven abstentions, the Senate has granted the go-ahead for its third extraordinary session in two decades where the Government has answered a series of questions about the integration process with UBS and its possible consequences. The country’s Executive had already promised a few days ago to present a detailed report on the operation to the Chamber within a period of twelve months.
The Credit Suisse collapse in mid-March forced the Swiss authorities to take action on the matter to prevent the expansion of the banking crisis. Thus, after intense negotiations where the purchase price began at 1,000 million euros, another of the largest banks in the country, UBS, agreed to absorb the entity for 3,250 million dollars. The agreement included the 110,553 million euros offered by the Swiss National Bank and a change in legislation to speed up the operation as much as possible. This legislative change allowed the purchase to be completed without a shareholder vote, a decision that was met with anger. “I feel that this institution has deceived me and that the government has not communicated well,” said one of Credit Suisse’s shareholders during his last meeting, held last week.
Nor did Parliament have the power to block the deal., since this was processed urgently through the parliamentary delegation of Finance, although it did have the power to impose conditions on how the liquidity line offered should be used. For example, the Green Party has demanded that environmental sustainability criteria be incorporated into the agreement. In his speech before the Upper House, the Interior Minister, Alain Berset, has defended the bailout as necessary “to maintain stability both in Switzerland and internationally.”
Berset has ensured that Credit Suisse has not disappeared overnight, alluding to the long list of scandals in which the bank has been involved for decades. According to Berset, the entity was “worn out” over the years by its directors. Starting today, the Swiss Parliament will examine the government’s actions in relation to the Credit Suisse bailout for three days.
A bankruptcy with “disastrous consequences”
Thus closes one of the most turbulent chapters for the Swiss banking sector. Last week the president of Credit Suisse, Axel Lehmann, apologized to shareholders claiming that “there were only two options, merger or bankruptcy”, although he did not receive any sympathy from those present. Some of the most angry are the owners of the AT1 bonds or ‘CoCos’ which amounted to 16,000 million Swiss francs and are currently worthless. A few hours before the shareholders’ meeting, the bondholders announced that they had hired the Quinn Emanuel law firm, “the most feared in the world”, to represent them in a possible lawsuit to recover the losses generated by the merger.
The Swiss authorities believe that without the acquisition by UBS, the result would have been much worse. “The bankruptcy of Credit Suisse would have had disastrous consequences,” Berset assured before the Upper House. Its collapse caused losses in the stock market of all European banking entities, including the Spanish ones, who lost 24,000 million in just four sessions. The markets also feared the fall of Deutsche Bank, which lost more than 13% on a day marked by a 17% increase in its non-payment insurance.