[the_ad id="21475"]
[ad_1]
Switzerland’s tab for shoring up its reputation as a financial center could run to 12,500 Swiss francs ($13,500) for every man, woman and child in the country.
To backstop the emergency sale of Credit Suisse Group AG to its Zurich rival UBS Group AG, the Swiss government pledged to make as much as 109 billion francs available — a hefty burden for the country of 8.7 million people.
On top of that, there’s a guarantee from the Swiss National Bank of 100 billion francs that isn’t backed by a government guarantee, according to the deal announced Sunday evening.
The combined sum of 209 billion francs is equivalent to about a quarter of Switzerland’s gross domestic product and exceeds total European defense spending in 2021. The price tag for Switzerland’s largest ever corporate rescue could add up to more than three times the 60 billion-franc bailout of UBS in 2008.
The renewed rescue for well-paid bankers sparked protests. About 200 people gathered outside Credit Suisse’s headquarters in Zurich on Monday, chanting “eat the rich” and throwing eggs at the building at the heart of the city’s financial district.
“We are fed up with the idea that if you are big enough, you get everything,” said Christoph Rechsteiner, a partner at the Zurich-based tax consultancy MME. “The law is changed for you over a weekend.”
On top of the financial guarantees, the Swiss government agreed to change legislation that bypasses shareholder approval and the country’s financial regulator wiped out about 16 billion francs worth of Credit Suisse bonds to increase the bank’s core capital.
“The solution that has been drafted now is that if all comes good, UBS makes a huge profit,” Rechsteiner said by phone. “They got Credit Suisse for nothing at all and the government is backing the losses.”
Despite the frustration, financial experts cautioned that there’s little chance the final price tag will reach the limits set by the government, while the cost of doing nothing could have been much higher.
On the 100 billion-franc guarantee to SNB, “there I see a somewhat limited risk,” said Manuel Ammann, director of the Swiss Institute of Banking and Finance at the University of St. Gallen. “I see more risks in the 9 billion francs that the government is guaranteeing in terms of excess losses for Credit Suisse.”
The government’s SNB guarantee would be partially covered by securities and bankruptcy…
Click Here to Read the Full Original Article at Fortune | FORTUNE…
[ad_2]
[the_ad id="21476"]