Credit Suisse faced imminent failure if it hadn't been sold to UBS in an emergency rescue last month, according to the Swiss central bank.
Without the government-brokered takeover, it's "very, very likely a financial crisis in Switzerland and worldwide would have happened," Swiss National Bank Vice President Martin Schlegel told broadcaster SRF in an interview that aired Monday. Credit Suisse "would then have been bankrupt."
The comments highlight the dramatic situation for the Swiss lender before it agreed to the 3 billion-franc ($3.3 billion) deal last month, when global markets were already fragile because of the Silicon Valley Bank failure in the U.S. They come as investors convene in Zurich's hockey stadium Tuesday for Credit Suisse's annual general meeting. Shareholders and proxy advisors have indicated they may vote against the reelection of several board members.
The deal was agreed without the approval of Credit Suisse and UBS shareholders, underscoring the urgency of the situation. Finance Minister Karin Keller-Sutter said previously that Credit Suisse wouldn't have lasted another day without the rescue.
With the merger agreed upon — "the best among bad solutions" — financial stability concerns won't keep the SNB from raising interest rates, Schlegel said.
The SNB has been tightening monetary conditions since last June and pushed through a 50 basis-point hike in March, unfazed by the crisis at Credit Suisse. It aims to keep price growth between 0% and 2%.
"Our mandate is price stability. We'll do everything to return inflation to our target. And we don't see signs that financial stability in Switzerland is threatened in any way," Schlegel said. "If necessary, we'll raise interest rates again."
A larger-than-expected
Observers still expect a further 25 basis-point hike at the next scheduled meeting in June, but possibly no further steps. Swiss consumer prices grew 2.9% last month — Europe's slowest pace.
Schlegel also said:
- "We know on a daily basis how the situation at Credit Suisse is, but we cannot comment on it publicly."
- "The bank is very large. But you need to look at the bank's business model. Wealth management is no high-risk business."
- "Every word" of the SNB and financial-regulator Finma statement from the Wednesday before the takeover was announced, which certified that Credit Suisse met the capital and liquidity requirements imposed on systemically important banks, "is still true."
- "You can assume that the SNB and Finma don't make themselves servants of a bank and give out a good statement on request."
- The new UBS "has no state guarantee."
