Switzerland's Finance Minister on the Credit Suisse Ordeal and the Failures of the 'Too Big to Fail' Plan

　　Lessons learned from the Credit Suisse ordeal

　　Switzerland's finance minister, Karin Keller-Sutter, has come to the conclusion that the current rules for winding down big banks, as outlined in the 'too big to fail' plan, are impractical and ineffective. She believes that a globally active systemically important bank cannot be simply liquidated without causing significant economic damage.

　　Citing expert estimates, Keller-Sutter stated that the impact of a disorderly bankruptcy of Credit Suisse could have been as much as double Switzerland's economic output, highlighting the potential severity of the situation.

　　The role of the Swiss authorities in the Credit Suisse crisis

　　During the recent Credit Suisse crisis, Keller-Sutter played a central role in the emergency negotiations. When Credit Suisse rejected a takeover offer from UBS, Swiss authorities considered nationalizing the bank to prevent a collapse that could have had global ramifications.

　　Ultimately, UBS agreed to acquire Credit Suisse in a government-brokered deal worth over $3 billion, helping to stabilize the Swiss and international financial markets. However, the deal came at a cost, with approximately $17 billion of risky Credit Suisse AT1 bonds becoming worthless.

　　The necessity of the UBS-Credit Suisse deal

　　Keller-Sutter defended the UBS-Credit Suisse deal as the only viable solution to stabilize the financial markets. She emphasized that it was not the time for experimentation and that the collapse of Credit Suisse would have had disastrous consequences for other banks.

　　An orderly wind down of Credit Suisse would have caused substantial damage to Switzerland's economy, potentially making it the first country to liquidate a globally systemically important bank.

　　The potential consequences of a Credit Suisse collapse

　　Keller-Sutter stressed that Credit Suisse would not have survived another day of trading without intervention. Swiss authorities worked swiftly to finalize the deal before markets opened in Asia on Monday, as a delay could have resulted in significant disruptions or even a collapse of payment transactions with Credit Suisse in Switzerland.

　　She also acknowledged that a restructuring or liquidation of Credit Suisse would have triggered major international upheaval in the financial markets, affecting not only Switzerland but also the global economy.

　　Dismissing the idea of U.S. pressure

　　Keller-Sutter dismissed the notion that the U.S. pressured Switzerland into the UBS-Credit Suisse deal. She clarified that there was no direct instruction from U.S. Treasury Secretary Janet Yellen to ensure that UBS acquired Credit Suisse.

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