The Swiss parliament voiced its fury on Tuesday at the collapse of Credit Suisse and how the rules intended to prevent such a major bank from getting itself into trouble completely failed.
At an extraordinary session of parliament called to debate the implosion of the bank and its takeover by larger rival UBS, Swiss President Alain Berset defended orchestrating the merger, saying a bankruptcy would have triggered a financial catastrophe and shredded the country’s reputation.
However, lawmakers lined up to slam the controversial March 19 deal that Berset’s government rapidly stitched together behind closed doors — cutting out parliament and presenting lawmakers with a fait accompli.
The merger dramatically changes the financial landscape in the wealthy Alpine country, which stakes much of its national prestige on sound banking.
The takeover triggered widespread unease in Switzerland at how its second-largest bank — one of 30 around the world deemed too big to fail — quickly imploded, after a series of scandals and ill-fated investment risks fatally undermined confidence in the 167-year-old national institution.
– ‘Red carpet’ for big banks –
Speaking for the right-wing populist Swiss People’s Party, Hansjoerg Knecht said small businesses had “skin in the game” but the “red carpet of state aid” would never be rolled out for them.
“Family companies and SMEs have always known how important it is to do business in a sustainable, realistic and prudent manner,” he said in the Council of States upper chamber.
“If we want to preserve the Swiss financial centre, we must ensure that the systemically important banks also reflect on these values.”
Eva Herzog, speaking for the Socialist Party, said: “Apparently, the 2008 financial crisis wasn’t enough to wipe out the type of banker we gleefully watched go under with Leonardo DiCaprio in ‘The Wolf of Wall Street’.”
The creation of a new supersized UBS “has done exactly what we didn’t want: created an even bigger bank, which if it got into trouble would probably be too much for the existing too-big-to-fail rules to handle as well, based on the experiences we have just had”.
Despite the criticism, the upper chamber voted Tuesday for the 109 billion Swiss francs ($120 billion) in government guarantees that were provided as part of the deal.
The lower house then plunged into a heated, hours-long debate, and ended up voting near midnight against those guarantees, after the left-wing parties and the Swiss People’s Party formed an unlikely alliance to secure 102 votes opposed against 71 in favour.
That vote however amounts to a symbolic display of the parliamentarians’ displeasure with the government, since guarantees have already been given and cannot be blocked.
– Switzerland shaken –
The three-day session at the Federal Assembly in Bern kicked off with Berset insisting that a takeover was the best option.
“Without intervention, Credit Suisse would have found itself, in all likelihood, in default on March 20 or 21,” he told the 46-member Council of States.
That “would potentially have created an international financial crisis with devastating effects for Switzerland, for companies, for private customers but also for the reputation of our country”, the president said.
“The demise of Credit Suisse is not the demise of Switzerland. It is the loss of a bank — a large bank, but only a bank. Nothing more, nothing less,” he insisted.
“Switzerland is shaken by this painful episode,” he said.
– ‘Call in the firefighters’ –
Amid fears of contagion following the collapse of three US regional banks, Credit Suisse was left looking vulnerable among the 30 banks deemed too big to fail.
Its share price plunged and, fearing a bloodbath when the markets reopened on March 20, the government, the central bank and the FINMA financial regulator strongarmed UBS into a $3.25-billion takeover.
Damien Cottier, the parliamentary leader of the Liberals party (FDP), complained that parliament had been sidelined.
“It’s frustrating, but when the roof burns we call in the firefighters; we don’t meet to work out whether to buy a fire engine,” Cottier told AFP.
The National Council lower chamber wants to examine the guarantees granted to prop up the rescue, the possibility of legal action against Credit Suisse’s governing bodies and the regulation of banks considered “too big to fail”.
Celine Vara of the Greens told AFP: “The disastrous management of the bank sparked the loss of confidence of the markets and the public. The leaders at the heart of these failures must answer for their actions.”
The government has calmed some of the anger by stripping Credit Suisse’s executive board of their 2022 and 2023 bonuses.
© Agence France-Presse