FINMA Chief Defends Credit Suisse's UBS Takeover Rescue As "Best Option"

The chief executive of the Swiss Financial Market Supervisory Authority (FINMA), defended Credit Suisse's rescue through a controversial takeover by rival bank UBS as the best solution with least risk to avoid a wider crisis and severe damage to Switzerland's standing as a financial centre, as reported by AP in Economic times.

Urban Angehrn, the head of FINMA, the Swiss financial regulator said that the merger was "the best option" and one that "minimised risk of contagion and maximized trust." He further added that two other options of a takeover by the Swiss government or putting Credit Suisse into insolvency proceedings would have serious implications.

According to the report, insolvency would mean that the functional parts of Credit Suisse in operation as a Swiss-only bank with a "damaged reputation" through bankruptcy. While a temporary takeover by the Swiss government would have exposed taxpayers to the risk of losses.

"One can well imagine, what devastating effect the insolvency of a big wealth management bank of Credit Suisse AG would have had on Swiss private banking," Angern said. "Many other Swiss banks could have faced a bank run, just as Credit Suisse did itself in the fourth quarter."

All the biggest global banks have to submit emergency plans for winding them up if they fail, in order to prevent global financial crisis triggered by the failure of globally connected US investment bank Lehman Brothers. This required measure was arrived at by international negotiations aimed at preventing a repeat financial disaster that occurred in 2008.

Even Credit Suisse was required to come up with such an emergency plan but putting such an emergency plan in action"would have achieved its immediate aim, but the damage to Switzerland as a place to do business, to the reputation of Switzerland, to tax revenue and jobs, would have been enormous," Angehrn said.

Swiss government officials, including the financial regulator, hastily announced a 3.25 billion USD takeover of Credit Suisse by UBS on March 19 after Credit Suisse's stock plunged and jittery depositors quickly pulled out their money.

Credit suisse shareholders did not get say in voting on the deal, as the government passed an emergency ordinance to bypass that step. This step was taken by authorities, fearing that a teetering Credit Suisse could further roil global financial markets following the collapse of two US banks.