Leaks and possible breaches of criminal law by regulators, bank executives and officials will be investigated.Switzerland’s Federal Prosecutor has opened an investigation into the state-backed takeover of Credit Suisse by its larger rival UBS.
The Bern-based prosecutor is investigating possible breaches of Swiss criminal law by officials, regulators, and executives at the banks. They agreed to an emergency merger last month in the span of one weekend in an effort to avoid a potentially devastating financial crisis.
According to a source familiar with the investigation, the probe will focus on sensitive information from negotiations that was released to the media. This could be a violation of industrial espionage laws or state secrecy laws.
“The Federal Prosecutor’s Office wants to proactive fulfil its mission to contribute to a clean Swiss Financial Centre and has established monitoring to ensure that it takes immediate action in all situations falling within its scope of activity.”
It stated that there were “numerous elements of Credit Suisse’s events that warranted investigation” and that they needed to be analysed in order to “identify any crimes that could be within the [prosecutor]’s scope”.
Stefan Blattler, the prosecutor, has issued several “investigatory orders”, to government agencies. His office also has been in touch with the federal government and the cantonal governments. He is likely to request interviews of key officials regarding the takeover.
In Switzerland, outrage has resulted from the forced marriage of two banks: Political parties have called for a special sitting in parliament this month. A formal inquiry commission is expected to be elected into power.
A poll shows that over three quarters of Swiss citizens oppose the $3.25bn merger, which will create a financial giant with more than SFr5tn ($5.5tn), assets under management.A majority support legislation to Split the bank Or even to claw back bonuses from senior employees, which they claim should be held accountable for their actions.
From all political parties, parliamentarians have also challenged the government’s use of emergency powers — the seven-person Federal Council – to grant taxpayer-backed financial guarantees UBS and silence shareholder opposition.
In order to facilitate the takeover, the Federal Council passed an ordinance that would wipe out more than SFr16bn in so-called AT1 subordinated mixed debt instruments issued Credit Suisse. However, it preserved some equity holders’ value.
Some large fixed-income investors around the world were upset by the measure, which also raised concerns about international regulators regarding its potential impact on other banks’ ability to raise capital.
Some investors who were affected by the decision have promised to sue the Swiss government and the financial regulator .
Bern insists that the situation was urgent and leaves it with very few options. Credit Suisse suffered a dramatic decline in its ability access liquidity just days before the rescue was completed, the government stated.
Karin Keller-Sutter (finance minister) stated that a state takeover or the orderly dissolution of Credit Suisse in a process called “resolution”, were not viable alternatives due to the unacceptable financial risk they would have posed to taxpayers.
Both Credit Suisse and UBS shareholders, who were denied a voice by the government fiat, will have next week an opportunity to air their grievances at the annual meetings of both banks.
Credit Suisse and UBS declined comment.