According to Swiss Finance Minister Karin Keller-Sutter, the multi-billion dollar state-sponsored takeover of Credit Suisse by UBS should proceed smoothly without

political obstructions. The Swiss parliament is set to hold an extraordinary session next week to discuss the emergency merger that was engineered by Swiss authorities after Credit Suisse came close to collapse.

The government intervention last month has been criticised by some for coming too late and promising too much taxpayer support for a bank that paid out billions in bonuses to executives. However, the minister defended the decision, stating that the primary goal of the Federal Council was to ensure the stability of the Swiss economy and the Swiss financial center and to prevent an international financial crisis.

To avoid a financial meltdown that the bank's uncontrolled failure could have triggered, nearly 260 billion Swiss francs ($287 billion) of liquidity support and state guarantees have been offered to back the takeover. Completing the merger was the highest priority, according to the minister, who stated that there are no current stumbling blocks to the process.

The new combined bank will have $1.6 trillion in assets, which is double the size of the entire Swiss economy, and more than 120,000 staff. The structure of UBS will have to be considered in the future, according to Keller-Sutter, who stated that UBS will have to hold more equity after the takeover, which will likely force them to shrink.

Switzerland's Competition Commission can make recommendations, and the minister added that the risks to taxpayers were acceptable, even though the government could assume up to 9 billion francs in losses incurred by UBS during the takeover.

The minister criticised the culture at Credit Suisse, which she said had set the wrong incentives and had not learned from previous scandals and prosecutions. She also defended the writedown of AT1 bonds to zero, a controversial part of the rescue. Keller-Sutter stated that these are high-risk bonds with high yields, sometimes over 9%, and that the prospectus for these bonds makes it clear that they can be written off if a company claims indirect government aid.

The special parliamentary session next week is important, according to the minister, and provides a welcome opportunity to get to the truth of the Credit Suisse debacle. She added that at the moment, parliament can only advise on the commitment credit, but it also has the opportunity to comment on the case and play an active role in the process. Photo by Wici, Wikimedia commons.