Swiss authorities gave the green light to the Credit Suisse rescue, with the Senate approving a government-backed loan package worth 109 million Swiss francs. The vote, conducted in a third extraordinary session within two decades, resulted in 29 votes in favor, six against, and seven abstentions. The chamber sought clarity on the integration with UBS and the potential consequences, and the executive pledged to deliver a detailed report on the operation within twelve months.
The mid-March collapse of Credit Suisse had already forced swift action to avert a broader banking crisis. After intense negotiations, UBS agreed to acquire Credit Suisse for 3,250 million, a price that reflected a rapid, downward revision from an initial offer of 1,000 million euros. The deal included 110,553 million euros from the Swiss National Bank and a legislative change designed to expedite the process. This change allowed the transaction to proceed without a shareholder vote, a move that sparked considerable controversy among Credit Suisse holders, who felt misled by the government’s handling of the situation.
Parliamentary power to block the deal did not exist, though lawmakers could influence how the liquidity limit would be used through the Parliamentary Finance delegation. The Green Party pushed for environmental sustainability criteria to be embedded in the agreement. In his address to the Upper House, Interior Minister Alain Berset asserted that the bailout was needed to safeguard financial stability both in Switzerland and internationally.
Berset underscored that Credit Suisse would not vanish overnight, pointing to the long history of scandals the bank had endured. He described the asset as having been worn down over the years by those at the helm. The Swiss Parliament planned to review the government’s actions surrounding the bailout over three days, beginning on the current day.
A bankruptcy with catastrophic consequences
The episode marked one of the most turbulent periods in Swiss banking history. Last week, Axel Lehmann, the president of Credit Suisse, apologized to shareholders and warned that there were only two options, a merger or bankruptcy. His stance, however, did not win him sympathy among the audience. Among the most aggrieved were holders of AT1 bonds, or CoCos, now rendered worthless and valued at CHF 16,000 million. On the eve of the shareholders’ meeting, bondholders announced they had hired the law firm Quinn Emanuel, known for aggressive litigation, to represent them in any potential lawsuit to seek damages from the merger.
Swiss officials believed the outcome would have been far worse if UBS had not stepped in. The bailout, they argued, prevented a collapse that could have sent shockwaves through European markets. Before the Upper House, Berset stated that Credit Suisse’s bankruptcy would have inflicted disastrous consequences, triggering losses across stock markets in several European banks, including those in Spain. The downturn also raised concerns about a slide in the value of other major lenders, as Deutsche Bank experienced a notable drop and non-payment insurance saw a sharp rise.