Swiss prosecutor opens probe into Credit Suisse takeover

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 looking into potential breaches of Swiss criminal law by government officials, regulators and executives at the two banks, which agreed an emergency merger last month over the course of a frantic weekend in order to avert a potentially catastrophic financial crisis.

A focus of the probe concerns sensitive information from the negotiations that was leaked to the press, said a person familiar with the investigation, which could constitute a breach of state secrecy or industrial espionage laws. 

“The Federal Prosecutor’s office wants to proactively fulfil its mission and responsibility to contribute to a clean Swiss financial centre and has set up monitoring in order to take immediate action in any situation that falls within its field of activity,” the authority told the Financial Times.

There were “numerous aspects of events around Credit Suisse” that warranted investigation, it said, which needed to be analysed to “identify any crimes that could fall within the competence of the [prosecutor]”.

The prosecutor, Stefan Blättler, has issued a number of “investigatory orders” to government bodies. His office has also been in contact with the federal and cantonal governments and is likely to seek to interview key officials in relation to the takeover.

The forced marriage of the two banks has caused outcry in Switzerland: political parties have triggered a special sitting of parliament this month in which a formal commission of inquiry is likely to be voted into power.

Polling shows that more than three-quarters of Swiss citizens are opposed to the $3.25bn takeover, which will create a financial behemoth with more than SFr5tn ($5.5tn) of assets under management.

A majority support legislation to split up the bank or even measures to claw back bonuses from senior staff, who they say should be held responsible for their actions.

Parliamentarians from across the political spectrum have also questioned the use of emergency powers by the government — the seven-person Federal Council — to extend taxpayer-backed financial guarantees to UBS and to silence possible shareholder opposition.

The Federal Council issued an ordinance to wipe out more than SFr16bn of so-called AT1 subordinated hybrid debt instruments issued by Credit Suisse in order to smooth the takeover, while choosing to preserve some value for equity holders.

The measure angered some large international fixed-income investors, and caused concern among international regulators over its impact on other banks’ ongoing ability to raise capital.

Some of the investors affected have pledged to take the Swiss government and financial regulator to court over the decision.

Bern has insisted the urgency of the situation last month left it with few options. Credit Suisse experienced a dramatic deterioration in its ability to access liquidity in the days before the rescue was finalised, on March 19, the government has said.

According to finance minister Karin Keller-Sutter, a state takeover of Credit Suisse, or its orderly break-up in a process known as “resolution” were not viable alternatives to the takeover owing to the unacceptable financial risks to taxpayers they would have incurred.

Shareholders for both UBS and Credit Suisse — who were denied a say by the government fiat — will next week have an opportunity to air grievances at both banks’ annual meetings.

Credit Suisse and UBS declined to comment.