Switzerland faced a full-scale bank run if Credit Suisse went bankrupt, Swiss regulator argues

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Allowing the bankruptcy of troubled lender Credit Suisse would have crippled Switzerland's economy and financial center and likely resulted in deposit runs at other banks, Swiss regulator FINMA said Wednesday.  

FINMA (the Swiss Financial Market Supervisory Authority) and the Swiss central bank brokered UBS' takeover for embattled Zurich rival Credit Suisse for 3 billion Swiss francs ($3.3 billion), in a deal announced on March 19. As part of the transaction, the regulator instructed Credit Suisse to write down 16 billion Swiss francs worth of AT1 bonds — widely regarded as higher risk investments — to zero, while entitling equity shareholders to payouts at the stock's takeover value.

The bankruptcy plan, FINMA CEO Urban Angehrn said in a statement, was «de-prioritised early on due to its high tangible and intangible costs.» It would have erased the holding company Credit Suisse Group, along with the parent bank Credit Suisse AG and its branches, while retaining the Credit Suisse (Schewiz) AG entity because of its «systemic importance.»

«The parent bank Credit Suisse AG would have gone under – a Swiss bank with total assets of over CHF 350 billion and ongoing business also running into many billions,» Angehrn warned. «It is not difficult to imagine the disastrous impact the bankruptcy of a bank and wealth manager as large as Credit Suisse AG would have had on Switzerland's financial centre and private banking industry. Many other Swiss banks would probably have faced a run on deposits, as Credit Suisse itself did in the fourth quarter of 2022.»

Angehrn noted that the emergency measure would have rescued Credit Suisse's payments and lending functions to the Swiss economy, but come at a higher overall cost