The name of the person who runs the Credit Suisse operation spoke: It could have triggered an international financial crisis

Finance Minister Karin Keller-Sutter, who was at the center of the ‘Credit Suisse bailout’ carried out by Switzerland last weekend, spoke to the Swiss daily NZZ yesterday.

“It could have triggered an international financial crisis,” Keller-Sutter said, following contingency protocols fundamental to the regulatory architecture of big banks.

Keller-Sutter said capital injections and additional regulatory rules on risk are helpful in times of stress, but in a real crisis, plans to facilitate the bailout or liquidation of large banks fall short.

‘THEY TAKEN OTHER BANKS TO THE ABYSS’

Secretary Keller-Sutter said: “I have come to the conclusion that a major globally active bank, described as ‘too big to fail’, cannot be liquidated in accordance with these plans. Legally, this may be possible. But in practice, the economic damage will be significant.”

Noting that last weekend was “clearly not the time to experiment”, the minister said that “the collapse of Credit Suisse would have pushed other banks into the abyss”. The finance minister, who took office at the end of December, said he was concerned about Credit Suisse’s liquidity problems when he first took office.

WHAT HAPPENED?

The banking crisis, which started in the US the week before, spread to Europe with Credit Suisse. In addition, deposits worth more than 10 billion francs were withdrawn from the bank daily. Subsequently, as part of a package prepared by the Swiss government, the UBS Group bought Credit Suisse, which has been in business for 167 years, for 3 billion Swiss francs and assumed the bank’s debt for 5.4 billion dollars.

While the Credit Suisse acquisition and actions taken by central banks had eased investor concerns in the early hours, the massive losses suffered by investors holding Credit Suisse debt securities have reignited investor concerns.

Swiss regulators set the value of Credit Suisse’s $17 billion equity bonds traded on the markets at zero as part of the sale agreement. This decision, which will strengthen UBS’s capital, angered investors who deal with bonds, which are a safer investment vehicle compared to shares.

Investors are concerned about the damage to investors holding Credit Suisse bonds, as well as the potential for problems in one country’s banking sector to spread to other countries and the condition of fragile midsize banks in the United States.