UBS CEO: Liquidation of CS would have triggered shock effects
Published: Thursday, Dec 21st 2023, 00:00
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According to UBS CEO Sergio Ermotti, Credit Suisse, which had run into difficulties, could have been liquidated "without a franc of loss for clients and taxpayers". However, the loss of reputation for the financial center would have been much greater than with the takeover by UBS in March, he said in an interview.
Of course the takeover was the better solution, Ermotti said in an interview with the "Neue Zürcher Zeitung" published on Thursday in response to a corresponding question. "Liquidating a major bank just to confirm that "too big to fail" works would have been pure masochism." The UBS CEO emphasized that it was not known what shock effects this would have triggered and that many more jobs would certainly have been lost.
Well managed crisis
Ermotti describes the CS crisis as an event that was detached from the rest of the industry and "developed over years". No one had wished for the downfall of CS and certainly not the way it happened. "But I don't know of any other country that would have been able to overcome such a crisis in 72 hours the way Switzerland did."
If such crises are to be prevented, regulation is needed to ensure that risks are managed appropriately. "If we had regularly published the results of the stress tests in Switzerland, CS's problems would probably have become apparent earlier." And the supervisory authorities would have to be given more meaningful parameters that would allow them to intervene in good time.
No more equity
In many cases, however, it is not just about competencies but also about credibility, said Ermotti. UBS also has a great interest in a strong financial market supervisory authority, Finma, but "strong" does not mean more regulation, but "targeted optimization of the framework conditions and clever rules and minds".
Ermotti was not impressed by calls for higher equity capital: such demands are pure populism, said the UBS boss. "CS had enough equity. It does not need more expensive equity. More capital would be expensive for the entire economy"
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