In an interview published Saturday, Swiss Finance Minister Karin Keller-Sutter said UBS’s (UBSG.S) multi-billion state-sponsored merger with Credit Suisse (CSGN.S) should continue without political interference.
The Swiss parliament will have an extraordinary session next week to consider the emergency merger the Swiss government arranged after Credit Suisse nearly collapsed.
About 260 billion Swiss francs ($287 billion) in liquidity support and state guarantees were given to assist the takeover and prevent a financial disaster from the bank’s uncontrolled demise.
Keller-Sutter told Finanz und Wirtschaft that UBS and CS have a merger agreement and that the government has promised the national bank to give CS money to maintain stability.
“UBS guarantee negotiations are ongoing. In numerous committee sessions, lawmakers didn’t want to risk the takeover “she added.
“No obstacles yet.”
The minister said completing the merger was the priority, defending the government’s involvement last month, which opponents argued came too late and pledged too much taxpayer assistance for a bank that paid billions in CEO bonuses.
She said the Federal Council’s main objective was to protect the Swiss economy and financial hub against an international financial catastrophe.
Keller-Sutter said it was the greatest option for the state and taxpayer.
Keller-Sutter said the future structure of UBS will have to be examined as the new bank will have $1.6 trillion in assets, treble the Swiss economy, and over 120,000 employees.
“UBS will need more equity following the transaction. This will shrink them instead “Keller-Sutter remarked.
The minister stated that Switzerland’s Competition Commission could provide suggestions.
Even though the government may bear up to 9 billion francs in UBS acquisition losses, taxpayer risks were acceptable.
Keller-Sutter said Credit Suisse’s culture had inappropriate incentives and hadn’t learned from past scandals and convictions.
The government supported the contentious AT1 bond writedown.
Keller-Sutter called these high-risk bonds with large yields, often exceeding 9%. In addition, the prospectus for these bonds states that a corporation can write off indirect government help.
She said next week’s special parliamentary session was vital and a welcome chance to uncover the Credit Suisse fiasco.
Parliament can “only” advise on commitment credit, although it can remark on the case and participate in the process.
