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Swiss Finance Minister Karin Keller-Sutter has raised concerns about the legal complexities involved in winding up global banks
Image Source: Bloomberg
In an interview with the Frankfurter Allgemeine Zeitung, she discussed the need for international standardization of rules for banks considered “too big to fail” to ensure they can be systematically dismantled if necessary.
Keller-Sutter is actively engaging with the Financial Stability Board and finance ministers from various countries, including Germany’s Christian Lindner, to address these issues.
“I’d like to raise awareness that winding up (a bank) may sometimes not be possible due to international legal risks. In the case of Credit Suisse, that was clearly a risk,” Keller-Sutter stated. She expressed skepticism about the effectiveness of compulsory creditor participation in recapitalization, commonly known as a “bail-in,” particularly in relation to major U.S. banks.
“The equity backing of the foreign subsidiary must be so large that it can be sold or liquidated in a crisis without damaging the Swiss parent company. That was exactly the problem with Credit Suisse,” she explained.
The collapse of Credit Suisse significantly impacted financial markets and led to its acquisition by UBS, prompting the Swiss government to implement new measures for managing too-big-to-fail banks. Recently, UBS has seen an improvement in its financial outlook, with S&P revising its rating to stable from negative.
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