Do., Apr. 20th 2023
One week after Swiss Parliament’s lower house voted to reject the government’s CHF109 billion guarantee on the shotgun merger of UBS and Credit Suisse (CS), the Federal Council announced the vote would have “no legal effect” on the merger.
On March 19, the Swiss government and financial watchdog FINMA announced that UBS would purchase CS for CHF3 billion in a last-ditch effort to save the failing bank. Switzerland put up a state guarantee on the merger totaling about one-third of the country’s GDP. The deal was made secretly over a weekend without consulting investors, clients or shareholders.
Parliament’s six-member finance delegation approved the merger. They cited an emergency law which they say allowed them to bypass Parliamentary approval. In the days following the announcement, Swiss citizens protested the move in the streets and politicians called for a special session, which was held last week.
During that session, Parliament voted to revoke the state guarantee on the merger. While many politicians called the vote a “symbolic slap in the face,” some Swiss lawyers have said that such a vote is “binding” under Article 34 of the Swiss Constitution. Moreover, should the vote be ignored it could call into question Switzerland’s direct democracy model.
On Wednesday, the Federal Council angekündigt that although it “acknowledged” parliament’s vote, it would not affect the UBS-CS merger in any way.
The Swiss government has said that their March 19th emergency decision to merge Switzerland’s two largest banks is binding and does not need Parliamentary approval. The merger was “necessary due to the exceptional circumstances and the high degree of urgency in order to avert a financial crisis and thus severe damage to the Swiss economy,” according to the Federal Council.
“If non-approval of the credits by Parliament were to result in the Confederation having to fully or partially reverse commitments already undertaken, the Federal Council’s ability to act in times of crisis would be significantly impaired,” it added.
“On the one hand, this applies to the negotiations with UBS on the guarantee contract,” it said, adding “but only to the extent that this does not jeopardize the takeover of Credit Suisse by UBS.”
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