Credit Suisse: Swiss prosecutors investigate purchase by UBS – 02/04/2023 – Market

Switzerland’s public prosecutor’s office has opened an investigation into the state-backed takeover of the state-backed bank Credit Suisse by its biggest rival, UBS.

The Bern prosecutor’s office is investigating possible violations of Swiss criminal law by government officials, regulators and executives at the two banks, which agreed to an emergency merger last month during a hectic weekend to avert a potentially catastrophic financial crisis.

“The Federal Public Ministry wants to proactively fulfill its mission and responsibility to contribute to a clean Swiss financial centre, and has initiated monitoring to take immediate action in any situation that falls within its field of activity,” the official told the Financial Times.

There were “numerous aspects of the events surrounding Credit Suisse” that warranted investigation, he said, that needed to be analyzed to “identify any crimes that might fall within the purview of the [promotor]”.

Prosecutor Stefan Blättler issued a series of investigation orders to government bodies. His office is also in contact with the federal and cantonal governments and will likely try to interview key officials in relation to the takeover.

The forced marriage of the two banks has sparked an outcry in Switzerland: Political parties have triggered a special session of parliament this month, which is likely to vote on a formal commission of inquiry.

Polls show that more than three-quarters of Swiss citizens are opposed to the $3.25 billion ($16.25 billion) takeover that will create a financial behemoth with more than CHF5 trillion ($5.5 trillion) , BRL 27.9 trillion) of assets under management.

Most support legislation to break up the bank or even measures to recoup bonuses from senior officials, who they say should be held accountable for their actions.

Lawmakers across the political spectrum also questioned the government’s use of emergency powers – the seven-person Federal Council – to extend taxpayer-backed financial guarantees to UBS and quell possible shareholder opposition.

The Federal Council issued an order to eliminate more than 16 billion Swiss francs from so-called AT1 subordinated hybrid debt instruments issued by Credit Suisse to smooth the takeover, while also deciding to preserve some shareholder value.

The move angered some large international fixed-income investors and caused concern among international regulators about its impact on other banks’ ability to raise capital.

Some of the affected investors have vowed to take the Swiss government and financial regulator to court over the decision.

Bern insisted that the urgency of the situation last month left few options. Credit Suisse experienced a drastic deterioration in its ability to access liquidity in the days before the bailout ended on March 19, the government said.

According to Finance Minister Karin Keller-Sutter, a state takeover of the bank or its orderly dissolution in a process known as a “resolution” were not viable alternatives to takeover because of the unacceptable financial risks they posed for taxpayers.

Shareholders of UBS and Credit Suisse – who were unable to speak out following the government decree – will have the opportunity to air their grievances next week at the annual meetings of both banks.

Translated by Luiz Roberto Gonçalves