Swiss parliament’s lower house on Tuesday evening began debating whether to approve 109 billion francs ($120 billion) in government guarantees for UBS Group AG’s takeover of Credit Suisse Group AG. The upper house gave its green light earlier in the day.
(Bloomberg) — Swiss parliament’s lower house on Tuesday evening began debating whether to approve 109 billion francs ($120 billion) in government guarantees for UBS Group AG’s takeover of Credit Suisse Group AG. The upper house gave its green light earlier in the day.
Lawmakers from both sides of the political spectrum again lined up to blame the government, regulators and the bank’s management for failures around the takeover last month. Two hours into the debate in the lower house, it wasn’t clear if a vote on the guarantees would be held Tuesday night.
Damien Cottier, an MP with the Liberal-Radicals, called the day the deal was struck a “day of shame” for Switzerland before going on to call it the “least-bad and least risky” option.
Cottier’s tone reflects that of many frustrated lawmakers who are critical — and in an election year want to be seen as being so — of the banks and the government while at the same time are wary of trying to block the deal. Though parliament doesn’t have the power to derail the takeover, the extraordinary session has forced the government to once again defend the unpopular emergency takeover by UBS Group AG announced on March 19.
In that vein, Swiss President Alain Berset opened the lower-house debate after 7pm local time by saying Credit Suisse’s “negative spiral” spurred his government into action. Temporary nationalisation, a forced bankruptcy and orderly wind-down of the bank were all considered but rejected in favor of the UBS takeover, he said.
The government, Swiss National Bank and Swiss banking regulator Finma “acted in a decisive manner to restore confidence,” Berset said.
Read more: Here’s what you need to know about this parliamentary session
Earlier in the day, more than a dozen lawmakers in the upper house 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 the president of the Free Democrats Thierry Burkart.
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 Berset earlier 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.
Job Cuts
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 in government loss guarantees.
Finance Minister Karin 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.
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.
‘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.
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, Jeff Black and Allegra Catelli.
(Adds MP’s comments in third paragraph)
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