CRIMINAL CAPITALI$M
Swiss regulators explained Wednesday that last month's controversial decision to sell off the country's troubled Credit Suisse bank cheaply was the best available solution to limit the risk of contagion to the global financial system.
April 5 (UPI) -- Switzerland's financial regulator sought Wednesday to justify the controversial decision made by the government and central bank to sell Credit Suisse to rival UBS for $3.2 billion, imposing massive losses on investors.
The Financial Markets Authority, or FINMA, said that following a six-month run on the bank it had four pre-prepared options on the day -- two of them ready to be signed -- resolution, nationalization, bankruptcy or a takeover.
Resolution and temporary nationalization were ruled out due to requiring more state funds and 100% investor bail-ins while the contagion risk to the global financial system of bankruptcy was considered so high that a takeover was deemed the least harmful solution, FINMA said.
"After carefully weighing up the advantages and disadvantages and the potential upsides and downsides, everyone involved came to the same conclusion," CEO Urban Angehrn said. "In this specific situation, a takeover of Credit Suisse by UBS was the best option available."
Anghern said the merger was the option that would most likely "stabilize the situation" and prevent the crisis from spreading further.
"As a global systemically important institution, Credit Suisse is not just any bank. The nature of the bank's business means it is highly interconnected with other market participants, both in Switzerland and globally," he said.
Angehrn said the current fragile state of the financial markets due to the shift to monetary tightening in 2022, the uncertain economic outlook, the Silicon Valley Bank and Signatures Bank crises in the United States and the whole geopolitical backdrop were also relevant to the decision.
"There was a high probability that the resolution of a global systemically important bank would have led to contagion effects and jeopardized financial stability in Switzerland and globally," he said.
The March 19 rescue deal saw Credit Suisse, which at the end of 2022 has assets of $1.4 trillion, sold for just $3.2 billion with shareholders receiving one UBS share for every 22.48 Credit Suisse shares they held.
Already wounded from a series of scandals and incidents, withdrawals on a "globally and historically unprecedented scale" totaling $153 billion in the fourth quarter caused the market's assessment of Credit Suisse's business model and the future to falter.
FINMA said that was the trigger for it to enter into an even closer, daily exchange with the bank from this point on, and in particular closely monitor Credit Suisse's liquidity situation.
A Federal Department of Finance-led steering committee was set up and met repeatedly with FINMA's committee on financial crises along with the Swiss National Bank.
Credit Suisse was ordered to prove it had contingency measures in place including risk reduction and strengthening capital and liquidity and to do everything possible to prepare for a potential sale, including finding a buyer.
But that effort was overtaken by last month's mini-banking crisis in the United States which threatened to topple Credit Suisse, forcing FINMA and SNB to cobble together the merger with rival UBS behind closed doors on a Sunday afternoon.
The deal has been mired in controversy ever since with FINMA forced to defend a decision ordering Credit Suisse to write down $17 billion worth of junior bonds to zero, UBS' CEO replaced and the country's top prosecutor launching a criminal probe into the takeover
April 5 (UPI) -- Switzerland's financial regulator sought Wednesday to justify the controversial decision made by the government and central bank to sell Credit Suisse to rival UBS for $3.2 billion, imposing massive losses on investors.
The Financial Markets Authority, or FINMA, said that following a six-month run on the bank it had four pre-prepared options on the day -- two of them ready to be signed -- resolution, nationalization, bankruptcy or a takeover.
Resolution and temporary nationalization were ruled out due to requiring more state funds and 100% investor bail-ins while the contagion risk to the global financial system of bankruptcy was considered so high that a takeover was deemed the least harmful solution, FINMA said.
"After carefully weighing up the advantages and disadvantages and the potential upsides and downsides, everyone involved came to the same conclusion," CEO Urban Angehrn said. "In this specific situation, a takeover of Credit Suisse by UBS was the best option available."
Anghern said the merger was the option that would most likely "stabilize the situation" and prevent the crisis from spreading further.
"As a global systemically important institution, Credit Suisse is not just any bank. The nature of the bank's business means it is highly interconnected with other market participants, both in Switzerland and globally," he said.
Angehrn said the current fragile state of the financial markets due to the shift to monetary tightening in 2022, the uncertain economic outlook, the Silicon Valley Bank and Signatures Bank crises in the United States and the whole geopolitical backdrop were also relevant to the decision.
"There was a high probability that the resolution of a global systemically important bank would have led to contagion effects and jeopardized financial stability in Switzerland and globally," he said.
The March 19 rescue deal saw Credit Suisse, which at the end of 2022 has assets of $1.4 trillion, sold for just $3.2 billion with shareholders receiving one UBS share for every 22.48 Credit Suisse shares they held.
Already wounded from a series of scandals and incidents, withdrawals on a "globally and historically unprecedented scale" totaling $153 billion in the fourth quarter caused the market's assessment of Credit Suisse's business model and the future to falter.
FINMA said that was the trigger for it to enter into an even closer, daily exchange with the bank from this point on, and in particular closely monitor Credit Suisse's liquidity situation.
A Federal Department of Finance-led steering committee was set up and met repeatedly with FINMA's committee on financial crises along with the Swiss National Bank.
Credit Suisse was ordered to prove it had contingency measures in place including risk reduction and strengthening capital and liquidity and to do everything possible to prepare for a potential sale, including finding a buyer.
But that effort was overtaken by last month's mini-banking crisis in the United States which threatened to topple Credit Suisse, forcing FINMA and SNB to cobble together the merger with rival UBS behind closed doors on a Sunday afternoon.
The deal has been mired in controversy ever since with FINMA forced to defend a decision ordering Credit Suisse to write down $17 billion worth of junior bonds to zero, UBS' CEO replaced and the country's top prosecutor launching a criminal probe into the takeover
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