The end of Credit Suisse (CS) is sealed. Switzerland's second-largest bank ends up under the wing of UBS at a bargain price of CHF 3 billion. The Swiss industry leader, who did not want this takeover, was carried to the hunt with enormous public support: The Swiss state is liable to the tune of CHF 9 billion for risks of loss on the CS balance sheet, and the Swiss National Bank grants liquidity assistance of CHF 200 billion.

One rubs one's eyes: After the state rescue of UBS in the financial crisis of 2008, did Switzerland not want to take precautions so that the public sector would never again have to save a bank from going out of business? Wasn't that why regulation was tightened? Aren't there sophisticated contingency plans developed over years of work for a situation like this? These remained in the drawer.

For the Swiss government and the Swiss central bank, the loss of confidence and thus the risk that would have resulted from the resolution of this systemically important bank for the stability of the domestic and international financial markets, not to mention Switzerland's reputation, seemed too dramatic.

Serious deficiencies of a quickly constructed rescue solution

The collapse of Switzerland's second-largest bank would certainly have sent huge shockwaves through the banking world, with unforeseeable consequences for the global economy. But the catch-all solution, which has now been built at very un-Swiss top speed, has serious shortcomings. At best, it is the second greatest evil, right after the scenario that has now been prevented. In terms of regulatory policy, it is even more: a declaration of bankruptcy.

This starts with the fact that taxpayers now have to pay for a debacle that Credit Suisse executives have caused in the past, while they were allowed to eat tens of billions in bonuses. With their years of mismanagement and the scandalous lack of a risk culture, they have managed the demise of the 167-year-old bank.

It is also serious that the state has unceremoniously eliminated the co-determination rights of UBS and CS shareholders in order to avoid any uncertainty in the market that the deal will actually come about. By emergency law – an absolute exceptional instrument that was last used in the corona pandemic – the government in Bern decreed that the takeover does not require the otherwise mandatory vote and approval of the shareholders' meeting.

Serious damage to legal certainty at the site

This is a very significant restriction of property rights. Legal certainty in Switzerland suffers serious damage and investor confidence is violated. It would be no wonder if shareholders took legal action against this and thus made new headlines again.

But that's not all: Switzerland is also undermining antitrust law. In view of the dominant market position that UBS and Credit Suisse have in Switzerland, the National Competition Commission (COMCO) will certainly raise serious concerns. But the Competition Commission can basically save itself its examination work. FINMA has announced that it will make use of its right to approve the solidarity of the banks "in the overriding interest of financial stability" and thus override the COMCO.

As a result of all these regulatory sins, UBS, even if it did not want this difficult takeover of its rival, can now significantly expand its dominant position in Switzerland in one fell swoop – with the blessing of the authorities and on favorable terms. The merger will also be bitter for the employees of the own company: Because of the overlaps in the business, many thousands of jobs will be cut here and there.

The significant weakening of competition also makes savers and entrepreneurs suffer, who now have to reckon with rising fees. The government and the SNB have not even obliged UBS to sell all or part of the profitable Swiss unit of CS after a certain period of time. Because the state absolutely wanted to make UBS the saviour in need, it sat here on the longer lever. The shrewd Chairman of the Board of Directors Colm Kelleher has got the maximum out of the national emergency for the big bank.

In view of this list of regulatory deficiencies, the question arises as to whether a temporary (partial) nationalization of Credit Suisse would not actually have been the better solution. The state is generally the worse entrepreneur; and the UBS management team can be trusted to carry out the necessary set-up and reorganization work professionally. But Switzerland could have gradually withdrawn from the rescued bank after an entry and a subsequent stabilization and passed on its shares to private interested parties in accordance with the law: Such a regulatory sin would have been repairable.

Instead, a banking colossus is now emerging that is finally too big to be left to its fate in a future crisis. But with its rescue, the public sector of the small country would then possibly be overwhelmed. What did the hapless CS Chairman Axel Lehmann say on Sunday evening? "This March 19 is a historic and sad day." Probably true.