10 October 2008
BERN — Switzerland’s government would step in to prevent the collapse of either of its two major banks, UBS AG and Credit Suisse Group, the country’s economics minister said Thursday.
Doris Leuthard told Swiss public radio DRS in an interview that hasty reactions and panic in the face of the global financial turmoil could do more harm than good.
But she acknowledged that Switzerland has plans in case of economic trouble.
"Something that’s surely important to us all, that none of us want, is for one of our big banks to get into a serious crisis or even go bankrupt", Leuthard said.
"The Federal Council would definitely prevent that", she added, referring to Switzerland’s seven-member governing cabinet.
UBS and Credit Suisse are considered foundations of the Swiss economy and banking system. In a country with a population of only 7.5 million, the two banks together employ more than 50,000 people.
UBS was hurt by heavy losses and the reduction in value of CHF 45 billion (EUR 30 billion) because of bad investments in the US subprime market, but recent recapitalisation efforts give Switzerland a cushion beyond that required of many other European banks.
The Swiss Bankers Association rejected any suggestion that government intervention might be necessary.
"We don’t see any sign of a banking crisis. The Swiss financial center is proving to be remarkably resilient", spokesman James Nason told The Associated Press.
Economy minister Leuthard said in her interview that it was important to avoid panic, adding that measures by some neighbouring countries to guarantee individual deposits could cause additional uncertainty.
Neighbouring Germany and Austria recently alarmed other European Union governments by saying that all money held by ailing banks in their country would be safe.
Switzerland will urge stricter financial market regulation at this weekend’s meeting of the IMF and the World Bank, Leuthard said. She also raised the possibility of setting international standards for the bonus payments bankers receive.
[AP / Expatica]