In a significant development for Switzerland's financial landscape, UBS, the country's largest bank, announced on August 11, 2023, that it has successfully concluded its government-engineered bailout plan, which was initiated to facilitate its acquisition of Credit Suisse. Swiss taxpayers, who had been holding their breath since the bailout plan's inception, can now breathe a sigh of relief as the state-backed assistance comes to an end.
The financial world watched closely as UBS, headquartered in Zurich, completed its acquisition of Credit Suisse on June 12, 2023. This strategic move aimed to prevent an international banking crisis, considering the tumultuous journey that Credit Suisse had been on in recent years, marked by scandals and plummeting share prices.
Under the bailout plan, UBS had access to an unprecedented sum of up to $230 billion in government support. However, as the merger progressed and UBS successfully navigated the complex financial terrain, it announced the voluntary termination of these rescue initiatives.
UBS wasted no time in repaying the substantial support it had received. The bank repaid $56.80 billion in loans from the Swiss National Bank and another $113.60 billion in government liquidity support. Moreover, the previously promised $10.22 billion from the government to safeguard the bank from losses was deemed unnecessary and therefore not claimed. As part of its commitment to resolving the crisis and stabilizing the financial sector, UBS paid $829.27 million in commitment fees and risk premiums.
The decision to engineer a bailout and merger was not without controversy. Critics raised questions about the use of taxpayer funds to consolidate Switzerland's largest banks, and this skepticism found resonance in the lower house of parliament, where symbolic condemnation was expressed.
However, Swiss Finance Minister Keller-Sutter defended the measures, emphasizing the necessity of maintaining financial stability in Switzerland. She stated, "The emergency measures aimed at maintaining financial stability are ending, and the Swiss Confederation and taxpayers are no longer running any risk in connection with these guarantees." She acknowledged the reluctance with which the guarantees were accepted but highlighted the ultimate goal of stabilizing the financial center.
The bailout and merger also faced legal challenges. Credit Suisse investors filed lawsuits against Swiss financial regulators, seeking compensation for the loss of $18.3 billion in higher-risk bonds.
However, the legal challenges that lie ahead underscore the complex and contentious nature of such interventions in the financial sector.