• Minister of Justice Baume-Schneider defends the encroachment on shareholders’ rights
• Baume-Schneider: “The best solution” – bankruptcy would have been a “disaster”
• Political reappraisal needed
On March 19, it was announced that UBS would take over the bankrupt Credit Suisse for a purchase price of three billion Swiss francs. The Swiss National Bank (SNB) promised both banks liquidity support of CHF 100 billion each in the wake of the crisis. While many international bankers and investors are relieved about this development – after all, it may have been possible to avert even more disastrous upheavals in the financial sector – some critics found harsh words for the lack of involvement of the shareholders of the two banks in this important decision-making process. According to Swiss shareholder laws, company takeovers must be agreed with the shareholders at an extraordinary general meeting.
Baume-Schneider: “It was the best solution”
However, the Federal Council applied an emergency law that allows an intervention in shareholder rights in exceptional situations. The Swiss Minister of Justice, Elisabeth Baume-Schneider, justifies this drastic step on the SRF radio show “Tagessprach”. Legally, the decision was impeccable, since the condition of an emergency was met. A bankruptcy of the systemically important CS would have had even worse effects. “If there had been bankruptcy, the shareholders would be in an even more difficult situation,” said the Federal Councilor. A collapse of CS “would have been a catastrophe at home and abroad”. In addition, there is always a risk for shareholders with their investments. “It was the best solution,” Baume-Schneider is sure.
CS CEO Ulrich Körner, who defended the CS takeover by UBS in a letter to his employees, has a similar opinion. At the same time, Körner emphasized that he remained “fully committed” to the bank. “I will be by your side as we work to make the transaction a success,” the manager affirmed.
Political reappraisal needed
In the further course of the interview, Minister of Justice Baume-Schneider emphasized the importance of the political processing of the severe CS crisis. The ugly end of the big bank actually revealed some uncomfortable truths about the Swiss financial industry. The Swiss financial supervisory authority FINMA has already launched an investigation into CS. According to Baume-Schneider, the CS crisis also showed that a lack of trust on the part of bank customers could not be counteracted by a large legal security system. “Then it will generally be difficult,” says Baume-Schneider. The withdrawal of billions in CS customer funds could hardly be stopped after the reputation of the big bank was damaged by a number of serious scandals – from the Greensill funds to the Achegos scandal and the shadowing of former top manager Iqbal Khan had been. It must now be discussed what the newly created UBS means for the country as an even bigger bank.
UBS faces difficult tasks
In fact, UBS faces huge challenges. The largest Swiss bank has once again grown considerably and is now by far the number one in the Swiss financial sector. In the coming months, the task will be to embed the sometimes frighteningly weak financial situation of CS in the per se stable profile of UBS. The first analysts have already expressed their concerns about this difficult situation. For example, the Canadian bank Royal Bank of Canada (RBC) downgraded its UBS rating from “Outperform” to “Sector Perform” and lowered the target price from 24 to 20 francs. It therefore remains to be seen whether the actually low purchase price of three billion francs for UBS will not incur enormous costs.
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