The Swiss authorities explain but do not convince the rescue of Credit Suisse
The reasons for the "orderly" bankruptcy of Credit Suisse explained by the Swiss authorities: that is, to defend the indefensible. The deepening of Teo Dalaveracuras
As gentlemen, the Swiss also like to give way to the ladies. Thus, to take on the no small task of explaining, to the educated and inclined, how and why Credit Suisse, the second Swiss bank , could only be absorbed by the first, Ubs, and it could only be so in the precise terms communicated on the evening of Sunday 19 March 2023, Ms. Karin Keller-Sutter, head of the Federal Department (as the ministries are called in the peculiar Swiss government system) of Finance and Ms. Marlene Amstad, president of Finma, the supervisory authority on markets and financial intermediaries, in interviews with the Neue Zürcher Zeitung (Nzz).
THE “BEST” SOLUTION FOR CREDIT SUISSE, ACCORDING TO SWITZERLAND
Both repeated in every possible way that, in the hectic week that ended on St. Joseph's Day, the authorities evaluated every conceivable alternative (including the failure of the CS) to conclude that the "best" solution (perhaps a phrase like " the least worst”, or Amstad and Keller-Sutter feared that the use of this more realistic formulation would nail them as an admission of guilt…).
Ms. Keller-Sutter stated verbatim that a possible "disorderly" bankruptcy of Credit Suisse would have caused damage and losses for an amount equal to 1-2 times the Swiss GDP, according to the estimates of unidentified "specialists". Again the minister, when asked about American pressure for the "best solution" announced on Sunday, replied: "No pressure, if anything, American colleagues expressed enormous concern".
As for the president of FINMA, in answering the precise questions of the interviewer Guido Schätti, she implicitly admitted that, contrary to what was declared in Sunday's press conference, it was not the " social storm" that caused the collapse of Credit Suisse, but the series of scandals that have hit the bank in recent years and the "errors" of management. And when Amstad recalls that all the authorities involved unanimously concluded that "the takeover by UBS was the best solution" and the interviewer comments that this is the official formula for "state aid", the president still clings turn to the mantra: “it was the best solution”.
WHAT REMAINS TO UNDERSTAND
There would remain a couple of curiosities: to understand whether the best solution should be interpreted as an orderly bankruptcy of Credit Suisse, and then to know in what form the " American colleagues " would have expressed their "enormous concern", despite noting that they have not exercised any pressure.
A few days ago the private banker Thierry Lombard had urged the authors of the bailout to publicly explain why the Swiss people (who in the political-constitutional jargon of the Confederation are called "sovereign") should expose themselves to save a bank with blows of tens of billions, which conversely, they are never found for health, the environment, education and the country's future in general: it is to be feared that the explanations provided by the two ladies have not completely satisfied him.
DEFEND AN INDEFENDABLE CAUSE
There is something touching in the discipline with which a leading political exponent, the finance minister, and the president of the FINMA, in order to defend an indefensible cause, resigned themselves to passing under the gauntlet of public opinion – even if fortunately in Switzerland the ad personam attack is not practiced (yet?), which is current currency in Italy. Others, perhaps, would have fared less embarrassingly, but at this point it's a negligible detail. The new fact these days is that the financial establishment has played its cards, has imposed its solution but doesn't have much else to say on the merits, while the game is not over.
It is very probable that 28 years after the last CPI (Parliamentary Commission of Inquiry), dedicated to the "managerial and organizational breakdown" of the Confederation's Pension Fund, one will be established in the Federal Assembly on the fall and rescue of Credit Suisse. All the parliamentary groups said they were in favor of the ICC and the Federal Assembly will meet immediately after Easter. Except that the parliament in Bern will not only be discussing the committee of inquiry, it will also have to approve the appropriations resulting from the rescue of Credit Suisse. At first, the question is only formal because the entire plan was approved on Sunday also by a parliamentary delegation "representing" the parliament, with the consequence that any vote against by the Federal Assembly would have a purely symbolic value, the "public financial coverage" of the risks of UBS associated with the acquisition having been finalized since Sunday.
But it's not that simple. There is one however that the Nzz explains in these terms: “Although the appropriations as such are intangible, the parliament can set certain rules of the game. In jargon we speak of framework conditions for the use of credits” . Even if it specifies that "how far this discretion can go is not entirely clear", the Nzz wonders: "Could the parliament insert a clause in the resolution approving the appropriation which provides that the validity of the guarantees will be subject to the management, by the of Ubs, of the Swiss branch of CS as an independent bank?”. And he concludes: “It is a widely shared request”.
It is obvious that if the hypothesised clause passes, the economy of the entire CS operation for UBS could change significantly. But it seems that the reviled politician has decided to deal with the issue, which is of considerable importance from the point of view of the Swiss labor market, of maintaining a minimum of competition in the domestic banking sector and also from the point of view of the risks for same institutional balances resulting from the creation of a Moloch which would be the conjunction of Ubs + CS.
It is said that politics is not able to keep the point, given the present instability of the West, instability that always plays in favor of the established powers, of the bureaucratic bodies (even the large multinational companies are) which exercise everywhere an invasive control even on a public opinion now intoxicated with "technology" and convinced that politics is, at best, a useless scrap. For Switzerland, however, it could be an existential challenge. Not only because the total potential public financial investment in the "orderly bankruptcy" of Credit Suisse corresponds to 25% of Switzerland's GDP.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/credit-suisse-salvataggio-spiegazione-svizzera/ on Wed, 29 Mar 2023 05:52:48 +0000.