- Switzerland’s finance minister said UBS’s $3.25 billion takeover of Credit Suisse was not a bailout.
- Top economist Mohamed El Elian disagreed, telling Bloomberg Television it was a bailout.
- Transactions brokered by Bern include government guarantees and liquidity provisions.
The Swiss government has avoided using the word bailout in the deal for UBS to buy Credit Suisse, but top economist Mohamed El-Erian has a different opinion.
“Yeah, it was a relief,” said El-Erian Bloomberg TV Sunday. “The word ‘bailout’ has become a bad word and everyone avoids it. They say it’s not a bailout, but they can’t explain why the money is being spent.”
The UBS and Credit Suisse deal — valued at CHF 3 billion, or $3.25 billion — comes with government guarantees and liquidity provisions. In particular, the Swiss government has guaranteed that UBS will receive up to CHF 9 billion in the event of losses on certain assets.Swiss National Bank Providing liquidity support of CHF 100 billion to both banks.
“It’s full of contradictions,” El-Erian told Bloomberg Television. “It’s a private sector solution, but it requires government intervention. It’s not the cleanest, but of the options available, this was the best they could have had.”
Elle Elian, Chief Economic Advisor to Allianz and Chancellor of Queen’s College, University of Cambridge, UK, mentioned several other options for Credit Suisse. nationalization and end the business.
His assessment of government-brokered mergers Swiss Finance Minister Karin Keller-Sutter He emphasized how the acquisition of UBS is a “commercial solution.”
“This is not a bailout. It’s a commercial solution because UBS bought Credit Suisse,” Keller-Sutter said at a press conference in Bern on Sunday.
“This is not to give credit to Switzerland or UBS, so we have found this solution to be the best one, and we hope it will be welcomed by other jurisdictions,” she said. Added.
Keller-Sutter also said allowing banks to fail could have a severe impact on Switzerland and the international financial system.
“The failure of Credit Suisse would have had enormous collateral damage, both on the Swiss financial market and internationally,” she said.
The merger of two Swiss banks comes after a tumultuous week for the banking sector. Silicon Valley Bank was shut down by regulators on his March 10th, fueling contagion concerns that could lead to a wider economic crisis.
Also, in 2008, Switzerland bailed out UBS in the midst of the global financial crisis, angered the Swiss people.