Breaches of criminal law in Credit Suisse-UBS merger to be probed by Swiss prosecutor
Switzerland’s Federal Prosecutor is investigating potential breaches of criminal law by officials involved in the state-backed takeover of Credit Suisse by UBS Group, which was announced last month. The prosecutor’s office is examining the deal for any evidence of wrongdoing by government officials, regulators, and executives at both banks. The acquisition of Credit Suisse by UBS for $3.3 billion was seen as an emergency move to prevent a meltdown in the country’s financial system. The merger was also designed to help secure global financial stability during a period of turmoil. Critics of the deal are concerned about the merged bank’s size, with over 120,000 staff worldwide and $1.6 trillion in assets.
There were “numerous aspects of events around Credit Suisse” that warranted investigation and which needed to be analyzed to “identify any criminal offenses that could fall within the competence of the [prosecutor],” the prosecutor’s office said in a statement. The office has set up a monitoring system so that it can take immediate action on any issues that fall within its area of responsibility. However, the office did not indicate any specific aspects of the merger agreement it might be investigating or how long the probe might last.
Mark Pieth, a professor emeritus of the University of Basel, suggested that the prosecutor might be probing breaches of secrecy provisions by officials, or the trading on inside information. He added that the wiping out of some bondholders as planned under the deal is also problematic. Credit Suisse and UBS declined to comment. A poll of Swiss economists found that nearly half think the takeover of Credit Suisse was not the best solution. They warned that the situation had dented Switzerland’s reputation as a banking center.
Concerns have been raised about the level of state support provided to UBS in the deal, with nearly 260 billion Swiss francs in liquidity and guarantees offered by the government and Swiss National Bank. Critics of the merger have also highlighted the possibility of up to 30% of staff losing their jobs due to the takeover, according to an unnamed senior UBS manager quoted in Swiss media. The deal’s announcement by the Swiss government, the central bank, and the market regulator has been seen as out of the ordinary by experts, with some suggesting that the rescue is so unusual that the prosecutor had to comment on it.