Lawmakers in the upper house of Switzerland’s parliament agreed to 109 billion francs ($120 billion) in government guarantees for executing the takeover of Credit Suisse Group AG. The bill now moves to the lower house, which is scheduled to debate it later on Tuesday.
(Bloomberg) — Lawmakers in the upper house of Switzerland’s parliament agreed to 109 billion francs ($120 billion) in government guarantees for executing the takeover of Credit Suisse Group AG. The bill now moves to the lower house, which is scheduled to debate it later on Tuesday.
Ahead of the vote lawmakers blamed the government, regulators and the bank’s management for failures around the takeover last month, setting the stage for an election year in which thousands of jobs are at stake.
Though the legislative doesn’t have the power to derail the takeover, the extraordinary parliamentary meeting scheduled for three days starting Tuesday, is forcing the government into continued defense of its actions during the unpopular emergency takeover by UBS Group AG announced on March 19.
“It was no forced marriage, it was a wedding driven by reason,” Finance Minister Karin Keller-Sutter said in defense of the merger.
More than a dozen lawmakers, including those from the small group that signed off on the transaction as part of the so-called financial delegation, voiced their grievances. Their concerns varied from being circumvented in the emergency legislation, to regulatory lapses that allowed Credit Suisse’s failings to go un-addressed, to demanding accountability for the bank’s management.
“The legal possibilities against the bankers responsible and the possibilities to claw back bonuses need to be exhausted to the fullest extent,” said Free Democrats’ Thierry Burkart, who leads the party of Keller-Sutter.
Some legislators called for greater powers for the financial regulator, Finma, amid a broader review of too-big-to-fail rules for the sector, while others asked for a parliamentary inquiry commission. Quick legislative changes are unlikely though, as became apparent during the debate.
The deal — described by President Alain Berset at the start of the day as the best option to re-establish confidence in markets — created a banking giant whose assets are more than twice the size of the Swiss economy.
Jobs
Politicians and business leaders have voiced worries that the combined lender will have excessive market power, leading to a loss of competition. Despite the risks involved in integrating Credit Suisse, UBS stands to become a banking “powerhouse” post merger, analysts at JPMorgan Chase & Co. wrote in a note Tuesday.
UBS, already one of the world’s largest wealth managers, is now taking over a key rival for a fraction of the value of its assets and receiving as much as 9 billion Swiss francs ($9.9 billion) in government loss guarantees.
Keller-Sutter made clear that if these guarantees turned out to be not enough, it would be up to parliament to decide on an extension. The government and UBS agreed on the lender taking on the first 5 billion francs in potential losses, before the administration steps in for the next 9 billion.
“Credit Suisse’s leadership has to take responsibility for its actions,” Hansjoerg Knecht, a member of the Swiss People’s Party, told the upper house of parliament during the special session in Bern. “Tens of thousands of employees worry for their jobs.”
Before the takeover, Credit Suisse had already planned to cut as many as 9,000 jobs worldwide over the coming years. The overlaps between the two banks’ businesses will likely lead to that number rising, though executives including UBS Chairman Colm Kelleher have said that it’s too early to say how big the cuts will be.
Local newspaper SonntagsZeitung reported earlier this month that as many as 11,000 jobs could be cut in Switzerland and another 25,000 globally as a result of the combination.
Finma Failed
Finma didn’t move in time, said Heidi Z’graggen, upper-house member of the Center Alliance.
“Finma’s job is to protect shareholder rights and ensure functioning of the financial center,” she said. “At this, Finma failed.”
A parliamentary inquiry commission is necessary to answer whether the financial regulator, the Swiss National Bank and the finance ministry reacted properly, she said. Such a body would have subpoena powers to summon witnesses.
Dramatic Tragedy
One of the members of the financial delegation — Peter Hegglin of the Center Alliance — highlighted that there had been no other option, though he regretted the situation.
“The decision wasn’t easy for me,” he said. “The banking industry was warned by the 2008 crisis — unfortunately, Credit Suisse’s leadership didn’t learn from the crisis,” he said. “Like in a dramatic tragedy, the managers destroyed values and made themselves rich in the process.”
- Read more: Here’s what you need to know about the special parliamentary session on the UBS-Credit Suisse takeover
Given the merger has been met with little public enthusiasm, parliament is also trying to curtail government powers in the future: They are attempting to block the use of emergency measures to push through deals like this.
–With assistance from Paula Doenecke and Jeff Black.
(Updates with upper-house approval, adds Keller-Sutter in 4th and 11th paragraph)
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