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Switzerland Was Informed To Better Plan For Bank Failure After Credit Suisse

Bern, September 1 - In the aftermath of the fall of Credit Suisse on Friday, a group of specialists told Switzerland that it needs to be ready for a big bank to fail. However, their report to the government did not include the radical changes that some say are needed.

This year, UBS Group (UBSG.S) became Switzerland's largest bank after the government quickly set up and helped pay for its takeover of troubled Credit Suisse to keep that bank from going bankrupt.

The collapse of one of the world's major banks, which was once a sign of Swiss financial power, caught Swiss officials and regulators by surprise. They had been dealing with the bank for a long time as it stumbled from one controversy to the next.

On Friday afternoon, a team of Swiss specialists, such as bankers and professors, told the government that it needs to be better prepared in case UBS, which is now much bigger, gets into trouble.

They wanted the country's authority, FINMA, to have more power by being able to find people. They said that FINMA must be given more power to step in and that Swiss officials should work together better.

The experts also said that FINMA should get closer to the heads of banks before a crisis.

The experts also said that it might be simpler for banks to get money from the central bank by letting them offer less insurance in exchange.

The suggestions do not have to be followed, and they might not make it past their report. The Swiss National Bank (SNB), which is the country's powerful central bank, said it did not agree with some of the ideas, including those about funding and how the authorities work.

The Credit Suisse deal is the first time a global bank has been saved since the 2008 financial crisis. It gives UBS a lot of power and gets rid of its main competitor.

It will change the way banks work in Switzerland, where Credit Suisse and UBS have stores all over the place, sometimes only a few feet apart.

The banks are two of the most important in the world of global banking. Together, they have assets worth up to 140% of Switzerland's gross domestic product, which is a lot of money.

The fall of Credit Suisse has sparked a discussion around the world about the changes that were put in place after the last recession in order to keep banks from getting too big to close, but which have since failed.

Even though Switzerland made owners and some bondholders lose money as part of their crisis changes, they did not want to shut down Credit Suisse and instead sold it to UBS.

Some people in Switzerland did not like the deal. "UBS won the settlement of the century," declared a spokesman for the ruling coalition's Social Democratic party. "We want bank rules that actually work."

Even more people see big problems.

"Swiss policy makers didn't keep an eye on Credit Suisse well enough over the past 10 years, which led to its demise," declared Beat Wittmann, head of the Swiss consulting company Porta Advisors.

Nicolas Veron, who works at the Peterson Institute for Global Economics in Washington, warned that if UBS got into trouble, Switzerland might not be able to help.

"The bailout of Credit Suisse is not perfect, but it's also not a story of bad strategy.

"The Swiss had two choices: the merger, which was plan A, or settlement, which was plan B. They decided that a deal was the better choice," he stated. He added that UBS does not have a similar back-up plan if it gets into trouble.
Throughout the worldwide economic downturn of 2008, the government had to help UBS, not Credit Suisse.

At the time, the Swiss bank gave over $54 billion to a way for UBS to get rid of bad debt, such as subprime loans.





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