Credit Suisse Buyout Faces Harsh Criticism at Home

GENEVA (AFP-Jiji) — UBS’s emergency takeover of its troubled Swiss rival Credit Suisse, with significant backing and arm-twisting from Bern, sparked fears Monday it could weaken the country’s biggest bank and financial sector as a whole.

Switzerland was in shock after its largest bank agreed under pressure from Swiss authorities to swallow up the second largest for $3.25 billion, in what the government insisted was a vital step to prevent economic turmoil from spreading throughout the country and beyond.

Swiss media and politicians alike expressed outrage that one of the country’s oldest and most iconic banking institutions went poof, insisting that despite a string of crises and scandals, it could have been saved.

Swiss authorities faced criticism for reacting too slowly as Credit Suisse — seen as the weakest link in European banking after several years of unrelenting scandals and crises — saw its share price implode last week amid market turbulence over the collapse of two US banks.

‘Historic scandal’

Balthasar Glattli, head of the Green Party, which wants new rules for regulating banks like Credit Suisse and UBS that are considered too big to fail, warned Monday that the new UBS would be “a monster that is too big to bail.”

Thierry Burkart, head of Switzerland’s rightwing Liberals party, meanwhile described Sunday as “a dark day for the Swiss financial sector and for Switzerland as a whole.”

Both of their parties called Monday for an emergency parliament meeting to discuss the deal, including billions in guarantees and liquidity guaranteed by the government and the central bank.

Parliament told AFP it was looking at holding such a hearing in mid-April.

The Tages-Anzeiger daily decried the deal as “a historic scandal”, while the Tribune de Geneve said it was a “waste, socially [for jobs], economically [for the reputation of the country], and shameful politically for the politicians who were too slow to act.”

Many acknowledged though that there had been little choice. The government had said the only alternative to the UBS deal was a full nationalisation of Credit Suisse.

The deal was the “best solution for restoring the confidence that has been lacking in the financial markets recently”, Swiss President Alain Berset told reporters Sunday.

But investors remained on edge, with UBS shares falling by as much as 15 percent early Monday before climbing into positive territory in the afternoon. They closed the day up 1.3 percent at 17.33 Swiss francs per share.

Shares in Credit Suisse meanwhile opened nearly 64% lower Monday morning, before clawing back some losses. The closed down 55.7% at 0.82 francs per share — slightly higher than the UBS purchase price.