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Switzerland’s Banking Crisis: Credit Suisse’s Collapse and Impaired Safe Haven Status

21st March 2023

Banking world in turmoil? 

The following news post reflects opinions from external sources and does not represent the views or opinions of our company or staff, but certainly makes interesting reading. 

Switzerland's banking crisis has been making headlines recently due to the collapse of Credit Suisse Group AG and the Swiss government's actions to secure UBS Group AG's purchase of the bank. The nation's long-held reputation as a haven of legal certainty for investors has been called into question, and accusations of a gross wilful breach of fiduciary duties owed to shareholders, investors, and depositors of Credit Suisse have been raised. The implications of these events are far-reaching, and there are concerns about unprecedented class actions for breaches of fiduciary duties, misrepresentation, and misleading conduct tantamount to fraud in damages and opportunity costs claims. In this news post, we present a collection of opinions from external sources on Switzerland's banking crisis and its impact on the nation's safe haven status.

Commentry and extracts. 

Switzerland's Wilful Breach of its Fiduciary Duties owed to Shareholders, Depositors' and Creditors of Credit Suisse under securities laws including Control Premium, Anti-Trust Takeover Code, Voting Rights, the Rule of Law Denied, to be deemed a Rogue State and impaired it's safe haven status forever.

UBS itself is therefore impaired as a Predator Acquirer that will cause Class Actions unprecedented in banking and securities actions unprecedented.

Nationalisation of Credit Suisse per bailout by Swiss National Bank first then Takeover is evidence sufficient for Unprecedented Class Actions for breaches of Fiduciary Duties, Misrepresentation, Misleading Conduct tantamount to fraud in damages and opportunity costs claims.

Read articles and decide yourself;

How Switzerland destroyed her reputation as haven of banking and the safety of investors rights against fraud and misappropriation of funds in the face of Gross Wilful Breach of Fiduciary Duties owed to Shareholders, Investors and Depositors of Credit Swiss in breaches:

Credit Suisse Collapse Reveals Ugly Truths for Investors (1)
Tuesday, March 21, 2023 03:14 AM 
By Hugo Miller

Nation has long traded on its image as a bastion of certainty
Weekend’s events may hamper Switzerland’s long-held reputation
(Bloomberg) --For decades, Switzerland has sold itself as a haven of legal certainty for bond and equity investors. The collapse of Credit Suisse Group AG revealed some unpleasant home truths. 
In the race to secure UBS Group AG’s purchase of its smaller rival over the weekend, the government invoked the need for stability and emergency legislation to override two key aspects of open markets: competition law and shareholder rights. Then bondholders discovered that $17 billion worth of so-called Additional Tier 1 debt was worthless. 

Aside from the sense of shame brought on by the bank’s collapse, legal observers say these three surprises raise some fundamental questions about the primacy of Swiss banking law and also sows doubt with foreign investors about putting money in the country.

It’s not good for Switzerland “if investors believe that their rights can be overridden,” says Kern Alexander, a professor of law and finance at the University of Zurich. “The way the crisis management is being carried out is panicked, and it’s undermined the rule of law and undermined Switzerland.”

In announcing the government-brokered sale of Credit Suisse to its Zurich rival on Sunday evening, the Swiss government cited an article of its constitution that allows it to issue temporary ordinances “to counter existing or imminent threats of serious disruption to public order or internal or external security.” In this case, this included overriding merger laws on shareholder votes. 

Then, when Finma chairwoman Marlene Amstad was asked during a press conference later that evening if the government was ignoring competition concerns in pushing the merger through, Amstad said financial stability trumped competition concerns. 

“Regulatory law gives us the power to override the competitive situation in the interests of financial stability, and we have made use of that here,” she said.

Together Credit Suisse and UBS would hold 333 billion Swiss francs ($360 billion) in customer deposits, 115 billion francs more than their nearest rival Raiffeisen, according to a UBS investor presentation. 

Read More: Credit Suisse Bailout Crosses a Debt Rubicon: Marcus Ashworth

But the biggest pushback from investors over the deal so far concerns the decision by Swiss banking regulator Finma to write down to nothing the AT1 bonds issued by Credit Suisse.  

AT1 bonds were introduced after the global financial crisis to ensure losses would be borne by investors not taxpayers. They are meant to act as a capital buffer in times of stress. Crucially, debt of this type at most other banks in Europe and the UK have far more protections and only AT1 bonds issued by Credit Suisse and former Swiss rival UBS have language in their terms that allows for total wipeout rather than a conversion to equity. 

Even if the risks of those AT1 bonds were made clear to investors at the time they signed on to them, this stark example of Swiss exceptionalism marks a departure from the general rule that bondholders come before shareholders.

“A lot of lawsuits will be coming from this, which will highlight the erratic and selfish behavior of Swiss authorities in this saga,” said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics. 

Ethos Foundation, whose 246 pension fund members represent 1.9 million people with 370 billion swiss francs in assets, has threatened as much over the issue of blocking shareholder votes. 

“Faced with this unprecedented failure in the history of the Swiss financial center, Ethos will continue to defend the interests of minority shareholders, starting with the Swiss pension funds,” the Geneva and Zurich-based foundation said in a statement on Monday. 

“All options will be examined in the coming days, including legal ones, to determine the responsibilities of this debacle,” it said.

Call Them CoCos or AT1s, Here’s Why They Got Zeroed: QuickTake

Meanwhile US law firm Quinn Emanuel Urquhart & Sullivan said it will host a call for bondholders on Wednesday with representatives from its offices in Zurich, New York and London to talk through the “potential avenues of redress which bondholders should be considering.”

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