Swiss government rejects Parliament vote on UBS-CS merger

Thu, Apr 20th 2023

Thanks, but no thanks. Switzerland’s Federal Council this week said it “acknowledges” Parliament’s vote to reject the CHF109 billion guarantee on the shotgun merger of UBS and Credit Suisse, but it won’t have any effect on the merger.

Swiss Finance Minister Karin Keller-Sutter defends the Federal Council’s decision to merge UBS and Credit Suisse in a special session of Parliament held last week (Keystone SDA).

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.

How we got here

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 announced that although it “acknowledged” parliament’s vote, it would not affect the UBS-CS merger in any way.

Protesters gathered in Zurich’s Paradeplatz hours after the UBS-CS merger was announced (Keystone SDA).

Where do we go from here?

The Swiss government has said that their March 19^th 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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Swiss government rejects Parliament vote on UBS-CS merger

Swiss government rejects Parliament vote on UBS-CS merger

Thanks, but no thanks. Switzerland’s Federal Council this week said it “acknowledges” Parliament’s vote to reject the CHF109 billion guarantee on the shotgun merger of UBS and Credit Suisse, but it won’t have any effect on the merger.

How we got here

Where do we go from here?

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