Swiss parliament’s two chambers are attempting to find a compromise on how to support government guarantees for UBS Group AG’s takeover of Credit Suisse Group AG after the lower house rejected the measure in a largely symbolic vote. Erich Ettlin, a Center Alliance member in the upper house, emphasized the importance of building a bridge between the two sides, as rejecting the guarantees would send a dreadful signal.
Limited Power of Parliament on Takeover
Although parliament does not have the power to stop the takeover negotiated last month, the lower house’s rejection highlights the anger among lawmakers on both sides of the political spectrum ahead of national elections later this year. The government had already received approval from a small group of senior lawmakers, the so-called financial delegation, which has the right to sign off on urgent fiscal matters on behalf of parliament.
Potential Resolution
Before rejecting the guarantees, the lower house added provisions that seek to adjust the banking law to limit the risks to the state from systemically relevant banks. The lower house now wants the upper house to support this stipulation. Once that happens, the lower house could sign off on the deal. The standoff is largely symbolic, as the government has stated that refusal of subsequent approval would be a political reprimand for the financial delegation, with no legal effect.
Special Session in Parliament
Lawmakers gather for a special session after ministers led by President Alain Berset agreed to provide up to 109 billion francs ($120 billion) in taxpayer money to support the takeover of Credit Suisse Group AG by UBS Group AG. While parliament cannot derail the deal, lawmakers are still likely to try to push the government to overhaul too-big-to-fail rules and pursue legal action against management at Credit Suisse. The debate is more about saving face politically than actually changing things, but MPs do have the opportunity to give the government a hard time.
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Overhauling Switzerland’s Banking Regulation
MPs are demanding an overhaul of Switzerland’s too-big-to-fail regulation for systemically relevant banks, given that the existing framework didn’t prevent the crisis. The center-left Social Democrats have said they will only approve the state aid if the government publicly commits to new rules that would prevent a case like Credit Suisse in the future.
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Conclusion
In conclusion, the Swiss Parliament is currently seeking a compromise on the government guarantees for the UBS Group AG’s takeover of Credit Suisse Group AG. This debate highlights the tension among lawmakers as they grapple with the potential consequences of the deal and the need for better banking regulations. Although the lower house’s rejection is largely symbolic, it reflects the growing concerns surrounding the too-big-to-fail issue and the necessity of implementing new rules to prevent future crises. As the parliamentary discussions continue, it remains to be seen what lasting impact this high-profile debate will have on Switzerland’s banking sector and the upcoming national elections.