The vice-president of the Swiss National Bank says that the takeover of Credit Suisse by UBS was essential.
(Photo: Bloomberg)
If the state-managed takeover had not come about, there would have been “very, very likely a financial crisis that would have affected the Swiss system, the Swiss economy and of course the global economy,” said Martin Schlegel, Vice President of the Swiss National Bank (SNB). Broadcaster SRF in an interview broadcast on Monday. “CS would then have been insolvent.”
The agreed merger was the best remaining solution at the time, but “the best solution among only bad solutions.” The last general meeting in the 167-year history of the traditional Swiss bank Credit Suisse will take place on Tuesday. There is a risk of trouble because the shareholders were refused a vote on the takeover.
The problems surrounding Credit Suisse did not stop the SNB from fighting inflation. The deputy chief of the SNB has confirmed his willingness to raise interest rates further to curb inflation. “Our mandate is crystal clear,” said Schlegel in an interview with Swiss TV on Monday. “And that is price stability.”
The central bank will do everything to ensure that inflation returns to its target range of zero to two percent. “If necessary, we will continue to raise interest rates,” Schlegel said. The inflation rate has been above the SNB’s target range for a good year. In March it was 2.9 percent and for the year as a whole the central bank expects 2.6 percent.
With the SNB’s key rate currently at 1.5 percent, interest rates are not high, said Schlegel. “And we see no signs at the moment that this could endanger financial stability in Switzerland.” The SNB deputy also confirmed that the central bank was ready to sell foreign currencies from its billion-dollar foreign exchange reserves in order to support the franc. In addition to raising interest rates, the central bank is relying on the inflation-dampening effect of a strong national currency to curb inflation.
More: UBS and Credit Suisse are threatened with immense job cuts and legal trouble