When a bank run started at Credit Suisse in mid-March 2023, a rushed acquisition deal involving UBS, the Swiss National Bank and Swiss federal government was agreed. The deal, which includes CHF 109 billion of federal government guarantees, was agreed by the Federal Council, Switzerland’s executive. This week Switzerland’s parliament rejected the CHF 109 billion federal government guarantee included in the deal.
The rushed deal included the federal government providing a CHF 9 billion backstop in favour of UBS against any losses incurred when selling certain Credit Suisse assets beyond the first CHF 5 billion. It also included the SNB providing up to CHF 100 billion of liquidity, which is guaranteed by the federal government, exposing Swiss taxpayers to a CHF 109 billion risk.
Despite a commission and the Council of States, Switzerland’s upper house, coming out in support of the CHF 109 billion guarantee, parliament rejected it by 102 votes to 71. The rejection was driven by no votes from the Swiss People’s Party (UDC/SVP) and the Socialist and Green parties, reported RTS.
The vote will not overturn the guarantees, which were made under emergency laws, however it represents a political blow to the Federal Council.
In addition, the affair has triggered significant anger and calls from politicians to make changes to the sector. Many pointed to the irresponsibility of bankers who had seemed to have learned nothing from the past. Calls were made to revise the rules around banks deemed too big to fail and to strengthen the powers of financial market regulator FINMA.
The Federal Council has announced it will produce a detailed report on the affair within a year.