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Swiss finance minister sees no 'stumbling blocks' to UBS takeover of Credit Suisse

Swiss finance minister sees no 'stumbling blocks' to UBS takeover of Credit Suisse

UBS's (UBSG.S) multi-billion state-sponsored takeover of Credit Suisse (CSGN.S) should proceed smoothly without political obstructions, Swiss Finance Minister Karin Keller-Sutter said in an interview published on Saturday.
The Swiss parliament is due to hold an extraordinary session next week to discuss the emergency merger engineered by the Swiss authorities after Credit Suisse came close to collapse.

Nearly 260 billion Swiss francs ($287 billion) of liquidity support and state guarantees have been offered to back the takeover and avoid a financial meltdown the bank's uncontrolled failure could have triggered.

"There is a merger agreement between UBS and CS, for its part the cabinet has made a commitment to the national bank to provide CS with liquidity in order to ensure stability," Keller-Sutter told newspaper Finanz und Wirtschaft.

"The guarantee agreement with UBS is still being negotiated. In many committee meetings, I got the impression that politicians definitely don't want to jeopardise the takeover," she added.

"I don't see any stumbling blocks at the moment."

Completing the merger was the highest priority, the minister said, who defended the government's intervention last month, which critics have said came too late and promised too much taxpayer support for a bank that paid out billions in bonuses to executives.

"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," she said.

"Under the circumstances, it was and is the best possible choice, which also places the least burden on the state and the taxpayer," Keller-Sutter said.

The new combined bank will have $1.6 trillion in assets - double the size of the entire Swiss economy - and more than 120,000 staff and Keller-Sutter said the structure of UBS would have to be considered in the future.

"UBS will have to hold more equity after the takeover. This will rather force them to shrink," Keller-Sutter said.

Switzerland's Competition Commission can also make recommendations, the minister added.

The risks to the taxpayer were also acceptable - even though the government could assume up to 9 billion francs in losses incurred by UBS by the takeover.

Keller-Sutter criticised the culture at Credit Suisse, which she said had set the wrong incentives and had not learned from previous scandals and prosecutions.

The minister also defended the writedown of AT1 bonds to zero, a controversial part of the rescue.

"These are high-risk bonds with high yields, sometimes over 9%," Keller-Sutter said. "The prospectus for these bonds makes it clear that if a company claims indirect government aid, they can be written off."

The special parliamentary session next week was important, she added, and a welcome opportunity to get to the truth of the Credit Suisse debacle.

"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."

($1 = 0.9051 Swiss francs)
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