News that UBS is looking financially better and better after its government-brokered takeover of ailing Credit Suisse in March 2023 is not going down well in some quarters. The leading Swiss bank cancelled its loss guarantee with the Swiss government on 11 August, testifying to improved confidence in its new status and acquired assets. But the news was not welcomed by investors in tier 1 notes sold by Credit Suisse, who lost some US$18 billion in a controversial regulatory decision during the takeover. Retail investors and bondholders alike are still pushing class action lawsuits against the takeover, with the Swiss Investor Protection Association (SASV) filing a case with a Zurich commercial court in August over losses to retail investors during the takeover.
Also, as detailed by an article in the Financial Times, retention of Credit Suisse’s domestic business is becoming a politically challenging issue in Switzerland. The $3.3 billion paid by UBS to acquire an undervalued Credit Suisse is the heart of the SASV case, and any spinout or other disposal of Credit Suisse’s domestic retail operations would simply underline that fact.
There are two very worrying aspects to the Credit Suisse debacle that justify the deepest concern about Switzerland’s readiness to continue as a transparent, open state. One is the very narrow Swiss interpretation of public interest arguments in media reporting, which forced the international “Suisse Secrets” investigation into wrongdoing at Credit Suisse to be conducted entirely by media groups outside Switzerland. Another is the decision in July by the Swiss parliamentary investigation into the collapse of Credit Suisse to keep its conclusions secret for 50 years - in order to protect Switzerland’s status as a global financial centre. This leads one to wonder whether the collapse of Credit Suisse would have happened within a more open, transparent system, with better oversight. There’s no way to be sure, but it’s clearly a question worth asking.
In an interview with Swiss media in late August, Stefan Brupbacher, director of Swissmem, the country’s mechanical and electrical engineering and tech industry association, warned that Switzerland needs to resolve its stalled negotiations with the European Union over a raft of issues, and that groups within the EU are losing patience. He also warned that Switzerland has lost much sympathy within Europe for its neutral stance towards Russia’s invasion of Ukraine, thanks to “an unhistorical, radical definition of neutrality” pushed by the extreme neutrality moves of the Swiss People's Party.
With elections due in October, unfortunately, there seems to be little appetite to face the hard choices, make decisions, and generally exercise leadership - except in the most reactionary, regressive sectors of the political class and the public. Switzerland’s readiness to adapt, evolve, and come to terms with new realities looks ever more questionable. That ought to worry anyone seeking to have their money managed there. After all, look what happened to the investors in Credit Suisse…