WirtschaftsWoche: How do you rate the decision that UBS should take over the ailing Credit Suisse?
August Benz: The solution makes sense because it continues to guarantee the stability and security of the financial center. It was important that the banking system functioned normally on the following Monday: payments, wages, exchange rate transactions. Possible failures would have had serious consequences for the entire economy. In the meantime, the debate has started about what the agreement means.
What’s your interpretation?
It’s good that a solution has been found. There were three options at this point. Credit Suisse could have been wound up according to the “too big to fail” regulations, or it could have been nationalized completely. The third solution is one under private law – and this has now been chosen.
From the point of view of politics, nationalization was not an option, because then there would have been even more taxpayers’ money in the fire. After all, there are elections in Switzerland this year.
So far, no tax money has flowed. Central bank liquidity support is a standard tool that is used again and again.
To person
August Benz, born in 1969, is Managing Director of the Swiss Bankers Association. The doctor of political science worked for UBS for many years.
However, the state has pledged guarantees of nine billion francs in the event that UBS suffers losses with bad Credit Suisse securities.
Neither UBS nor the authorities want this scenario to occur. If losses were to be incurred, UBS would assume them itself up to a certain threshold. The Confederation has also granted UBS a guarantee of CHF 9 billion to cover potential losses from certain assets that UBS will assume as part of the transaction should future losses exceed a certain threshold. You have to understand that those responsible at UBS could not look fully into the books of Credit Suisse before they approved the takeover, if only because of the time available.
Why then no settlement according to the “too big to fail” rules?
Because the solution found is the better one.
So you like the solution too?
Nobody wanted that. But as it stands, it was the best solution among the options available.
What damage has the Swiss financial center taken through this weekend?
The main thing is that its offer is available without restrictions. The Swiss financial center is stable and functioning. This is the most important contribution to the reputation of the Swiss financial center. At the end of the day, the customers determine the reputation of the financial center through their daily decisions.
Good cue. Among wealthy people abroad, Switzerland has a reputation as a haven of safe money. Will these customers withdraw their money from Switzerland?
Switzerland remains a haven for security and stability. But of course it is the case that customers ask questions. That’s justified. Nevertheless: the wealth management business has a 150-year history in Switzerland. You get enormously good services in this country if you want to invest your money. If customers entrust money to banks in Switzerland, you can invest in all sorts of currencies and in a wide range of products. I am convinced that customers appreciate this.
Wouldn’t customers then be more likely to diversify their risk from Switzerland to locations such as London, Singapore, Hong Kong or Dubai?
Customers already have the option of investing their money in these regions, for example via a Swiss private bank. In addition to the banking services in Switzerland, there are other advantages: the Swiss franc as a stable currency, the strong economy, and low inflation. Switzerland is still attractive.
On the other hand, Credit Suisse, an icon of Switzerland’s rise, is disappearing. That must gnaw at the self-confidence of all bankers.
It’s a historical institute. Of course that moves people. The bank as we know it will probably no longer exist. Nevertheless: Swissair no longer exists either. But that’s what Swiss is for.
… and it belongs to Lufthansa.
Swiss is still perceived as a strong Swiss brand and has been recognized for its top quality. Life goes on even after crises. And it is our job as the Swiss financial center to secure the future. The core business is and remains asset management. And that doesn’t go away.
Also read: “If that happened in Germany, as a shareholder I would go all the way to the Constitutional Court”
There is said to have been massive pressure from the Americans and British on Switzerland when it took over the banks. How do you see it?
If a globally systemically important bank gets into this situation, you also have to coordinate internationally because the financial centers are interconnected. The Federal Council has clearly denied that it was forced to reach this agreement by foreign governments.
In addition, Switzerland has been criticized for its neutrality. Switzerland refuses to pay export licenses for Swiss ammunition to Ukraine to countries like Germany.
Geopolitics has changed. Since the founding of the Swiss state, the Swiss have been discussing the effects of neutrality. There was always debate. However, it is a political discussion. The banks in Switzerland are globally networked and accordingly fully comply with international standards, including the EU sanctions against Russia.
Stricter regulation of the banking system is now being debated in Switzerland.
It is important to first understand where exactly the problem is located. You have to take your time for this analysis. The danger is that something will be regulated quickly – but the problem will not be solved as a result. It has not yet been clarified how the takeover of Credit Suisse by UBS will be implemented in practice.
What do you think is the reason that it was able to come to this?
It was a crisis of confidence.
Can this be regulated?
In my view, trust goes back to the culture of a company. I worked for UBS for many years and during this time I also experienced the rescue of UBS by the state. From this time I know: The culture has to be specified by a company from above and lived by everyone. A state cannot regulate trust and culture.
Also read: The super-rich fear the apocalypse and are looking for security – for themselves and their billionn
