Switzerland: According to national regulator FINMA, the troubled Credit Suisse's acquisition by rival banking behemoth UBS has allowed Switzerland's economy to avoid serious issues like deposit runs at other banks.

The historic takeover for 3 billion Swiss francs ($3.3 billion) was facilitated by FINMA and the Swiss central bank in a deal announced last month.

As part of the deal, the regulator required Credit Suisse to write down to zero approximately 16 billion Swiss francs ($17.6 billion) of its Additional Tier 1 (AT1) bonds, which are widely considered to be higher risk investments. This was done to increase the bank's capital and address its liquidity issues.

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The bankruptcy plan was "de-prioritized early on due to its high tangible and intangible costs," according to FINMA CEO Urban Angehrn. The CEO made the point that insolvency would have left Credit Suisse operating as a Swiss-only bank with a "damaged reputation" but with its functional components. According to reports, taxpayers would have been at risk of suffering losses in the event of a brief takeover by the Swiss government.

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According to Angehrn, "the parent bank Credit Suisse AG would have failed. It is a Swiss bank with total assets exceeding 350 billion Swiss francs ($387 billion) and ongoing business exceeding many billions." It is not hard to envision the disastrous effects the insolvency of a bank and wealth manager of the size of Credit Suisse AG would have had on Switzerland's financial centre and private banking sector, he continued. As Credit Suisse did in the fourth quarter of 2022, "many other Swiss banks would have likely experienced a run on deposits."

According to the FINMA CEO, "the damage to the Swiss economy, financial centre, and Switzerland's reputation would have been enormous, with unquantifiable effects on tax revenues and jobs."

Additionally, he contended that the merger plan was ultimately preferred in order to both stabilise Credit Suisse and avoid a cascading effect on the world banking industry.

The decision was also influenced by the "current fragile state of the financial markets due to the shift to monetary tightening in 2022, the uncertain economic outlook, the crisis at some US banks, and the overall geopolitical backdrop," according to Angehrn. There was a strong likelihood that the failure of a globally significant bank would have had cascading effects, endangering financial stability both in Switzerland and internationally.

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The US banking crisis made Credit Suisse's problems worse because the company was already dealing with a number of scandals, legal problems, and customer exodus. Additionally, due to legal and regulatory restrictions, its largest investor, Saudi National Bank, declared in March that it would be unable to offer financial support.

Credit Suisse stated that it would suffer another "substantial" loss in 2023 before turning a profit in 2024, accounting for a net loss of 7.3 billion Swiss francs (nearly $8 billion) in 2022.