UBS’s multibillion-dollar acquisition of Credit Suisse should proceed without political hurdles, Swiss Finance Minister Karin Keller-Sutter said in an interview published on Saturday.
The Swiss Parliament will hold an extraordinary session next week to discuss the emergency merger engineered by Swiss authorities after Credit Suisse was on the brink of bankruptcy.
Nearly 260 billion Swiss francs ($287 billion) in liquidity aid and state guarantees have been offered to support the takeover and prevent the financial collapse that could have triggered the bank’s uncontrolled bankruptcy.
“There is a merger agreement between UBS and CS, for its part the cabinet has made a commitment to the national bank to provide liquidity to CS to guarantee stability,” Keller-Sutter told Finanz und Wirtschaft newspaper.
“The guarantee agreement with UBS is still being negotiated. In many committee meetings, I got the impression that the politicians do not want to jeopardize the acquisition,” he added. “At the moment I don’t see any pitfalls.”
Completing the merger is the top priority, said the minister, who defended government intervention last month, which critics said came too late and promised too much taxpayer support to a bank that paid billions in bonuses to its executives.
“The primary objective of the Federal Council was to guarantee the stability of the Swiss economy and the Swiss financial center and to avoid an international financial crisis,” he said.
“Given the circumstances, it was and is the best possible option, which also places the least burden on the State and the taxpayer,” Keller-Sutter said.
The new combined bank will have $1.6 trillion in assets – double the entire Swiss economy – and more than 120,000 employees, and Keller-Sutter said the structure of UBS will have to be considered going forward.
“UBS will have to hold more capital after the acquisition. This will rather force them to shrink,” Keller-Sutter said.
The Swiss Competition Commission can also make recommendations, the minister added.
The risks to the taxpayer were also acceptable, although the government could take up to 9 billion francs in losses incurred by UBS with the acquisition.
Keller-Sutter criticized Credit Suisse’s culture, saying it had set the wrong incentives and failed to learn from previous scandals and prosecutions.
The minister also defended zero depreciation of AT1 bonds, a controversial part of the bailout.
