Home Editions Credit Suisse bailout doesn’t stop bank shocks and sparks outrage in Switzerland

Credit Suisse bailout doesn’t stop bank shocks and sparks outrage in Switzerland

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Credit Suisse’s express sale to UBS this Sunday averted the bigger evil of the uncontrolled collapse of a symbol of Swiss financial power, but its rescue might not be the final chapter in the banking crisis that began in the US two weeks ago. European institutions posted significant losses at the start of the day in the stock market on Monday, though they eased as the session progressed amid high volatility. Among the biggest sufferers is UBS itself, whose shares fell 5%, with a decline that extended to more than 15%. The price paid by Credit Suisse, 3,000 million euros, may seem cheap if one takes into account that only two days earlier it was valued at 7,500 million, but the firm, now the great dominator of the sector in Switzerland and among the giants has become one. Of Europe, it has to show it is capable of digesting takeovers.

Freedom in the end This leaves it as a positive reading that the authorities have been nimble enough to prepare a firewall in record time, but mistrust caused by the sudden collapse of one of Europe’s major banks, coupled with the problems of regional entities in the US. While they don’t appear to have bottomed out—First Republic Bank collapsed before US markets opened—they haven’t finished their job of calming the uncertainty. German Deutsche Bank and Commerzbank, Dutch ING and French Societe Generale were among the hardest hit. On the other hand, the Spanish resisted somewhat better than their European counterparts. Credit Suisse’s value, although already irrelevant as its integration into UBS is closed, includes the discount at which it was sold: it fell 60% to 0.73 francs, still a significant premium for those who still held shares. It was a shock.

Hours after historic rescue operation, reactions abound in relief lehman pall -more visible abroad- and a mixture of shame and anger in Switzerland. The country has seen an icon of banking with a history of 167 years go missing in a busy week. Although in recent times a succession of scandals had driven it away from the population, the institution still had the word Swiss in its name, and was founded by Alfred Escher, the originator and builder of the railway, one of the country’s great historical figures. Federal Polytechnic Institute K. For this reason, many believe that the unparalleled gluttony of Credit Suisse executives has betrayed that legacy, tarnished Switzerland’s name and sunk a bank that has weathered wars and pandemics.

With Switzerland in an election year, the case would still lead to high-tensioned debates and exchanges of reprimands. Socialists demand an investigation, and PLR liberals loudly express the sense of wounded pride running through the country. “What happened to Credit Suisse is a shame for Switzerland.” The nationalist right of the UDC has leveled allegations against the negligent management of senior officers. “The Swiss must answer for the errors of Credit Suisse management with billions of francs of national wealth,” it said, referring to the 100,000 million liquidity line the Swiss national bank had made available to UBS. , and received 9,000 million guarantees to cover possible losses of their investments in Credit Suisse.

Mark Chesney, professor of finance at the University of Zurich, sees a risk in the concentration of the Swiss banking sector. “The enormous power that UBS is going to have is dangerous. What if he has the same problem again as in 2008? This is a forward kick. It’s not just the bankruptcy of Credit Suisse, it’s the bankruptcy of casino finance.” He is also critical of the publicly posted lifeline for UBS. “Those guarantees are huge, and no one has asked the taxpayer whether he agrees.”

It can’t be said that the group’s collapse came as a complete surprise: no one was unaware that Credit Suisse was facing seriously declining bottom lines, volatility at the top, and receiving To do this, Saudi money had to be resorted to. Its poor risk management, coupled with bad practices harshly sanctioned by regulators, is undermining its credibility, especially in the last five years. Still, he had managed to survive, and many expected it to be just another bump in the road.

They also knew that outside Swiss borders it was the weakest link in European banking. Bank of France Governor Francois Villeroy de Galhau said this in an interview on Monday. french inter, “We have known for years that Credit Suisse was a troubled bank, losing money and taking on a range of risks. It was a bank mired in a series of scandals and reputation problems. Both he and Finance Minister Bruno Le Maire have defended the soundness of the French banking system.

If anything has led to the mistrust of Credit Suisse and the deposits being leaked, it is necessary for the authorities to send a public message of calm, even if their effectiveness has not been proven. “The German financial system is stable,” said a finance ministry spokesman from Berlin on Monday, the same message carried by German financial regulator BaFin.

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