The Credit Suisse debacle

27th March 2023
-IAM, News

Daniel Pfund, Senior Financial Analyst

After 166 years of existence, Credit Suisse is dead. On Sunday evening, in a historic announcement, the Federal Council decided to “merge” the two largest Swiss banks without the agreement of their respective owners (the shareholders). The government invoked article 184 al 3 of the Swiss constitution, “the safeguarding of the country’s interests”, which allows the Federal Council to adopt ordinances and take the necessary decisions. Obviously, neither UBS nor Credit Suisse wanted this “merger”, which is simply an attempt to save the global financial system.

In market terms, UBS is buying Credit Suisse for CHF 3 billion, which corresponds to CHF 0.75 per share. The reaction of investors was not long in coming this morning, with the price of Credit Suisse opening at CHF 0.70 (-62% compared to the price on Friday evening). But UBS shareholders were not winners either, with UBS’s share price also falling by -8%.

It goes without saying that there are no winners in this bailout: the fundamental rights of shareholders are being violated, the Swiss financial center is taking serious reputational damage, employees are all at risk of being laid off, and Swiss clients will have less choice. Yet, only two days ago, the former president of FINMA declared that the Comco would certainly not approve such a merger… Are we going to see more legal violations in the name of safeguarding the country’s interests?