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Swiss Federal Prosecutors Launch Investigation Into Credit Suisse’s Acquisition by UBS Amid Government Support

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On April 2, according to a report by the Financial Times, Swiss federal prosecutors have launched an investigation into the acquisition of Credit Suisse by a larger competitor, UBS

Swiss Federal Prosecutors Launch Investigation Into Credit Suisses Acquisition by UBS Amid Government Support

On April 2, according to a report by the Financial Times, Swiss federal prosecutors have launched an investigation into the acquisition of Credit Suisse by a larger competitor, UBS, with government support. Bern based prosecutors are investigating whether government officials, regulators, and executives involved in the two banks have violated Swiss criminal law. Last month, in order to avoid a potentially catastrophic financial crisis, the two banks reached an emergency merger agreement just over the weekend. “The Swiss Federal Prosecutor’s Office stated that it hopes to actively fulfill its mission and responsibilities, contribute to the establishment of an honest Swiss financial center, and has established a monitoring mechanism to take immediate action in any circumstances within the scope of its activities.” Prosecutor Stefan Bl ä ttler has issued a series of “investigation orders” to government agencies. (Jin Shi)

Financial Times: Swiss prosecutors investigate UBS’s acquisition of Credit Suisse

Swiss federal prosecutors have initiated an investigation into the acquisition of Credit Suisse by UBS, a larger competitor, with government support. The prosecutors are investigating whether government officials, regulators, and executives involved in the two banks have violated Swiss criminal law. The merger agreement between the two banks was announced over the weekend, last month, to prevent a potential financial crisis.

Background

The Credit Suisse Group is a leading multinational investment bank and financial services company, while UBS is the largest Swiss banking and financial institution globally. In October 2020, the Credit Suisse Group endured significant losses due to investments in insolvent companies. This led to several changes within the company, including the replacement of CEO Tidjane Thiam by Thomas Gottstein.
Following the announcement of losses, rumors about a potential buyout surfaced, leading UBS to express interest in the acquisition of Credit Suisse. However, the Swiss government stepped in to prevent the merging of two major Swiss banks, believing such fusion would hurt the country’s financial sector.

Investigation

According to the Financial Times report, Swiss federal prosecutors have opened an investigation into the merger of Credit Suisse and UBS. The prosecutors aim to ensure that Swiss criminal law has been followed during the acquisition process, and no official or executive benefited from their position.
The Swiss Federal Prosecutor’s Office hopes to fulfill its mission and responsibilities by contributing to the establishment of an honest financial center in Switzerland. The office has established a monitoring mechanism to respond swiftly to any illegal activity within the scope of its activities. Prosecutor Stefan Blättler has issued a series of “investigation orders” to government agencies.

Concerns

The merger of two Swiss banks has raised concerns among industry experts about potential financial risks. Critics claim that such acquisitions cause market imbalances and allow for banks to keep making risky investments while receiving immunity from market fluctuations. Furthermore, two large banks merging can create a monopoly-like situation that eventually benefits shareholders, but not necessarily consumers.
Additionally, government support for the acquisition has sparked suspicions that Swiss bankers and politicians may have been involved in illegal activities.

Conclusion

The investigation into the acquisition of Credit Suisse by UBS has raised questions about the efficacy of mergers of large banks and concerns of illegal activities by government officials, regulators, and executives. While the Swiss Federal Prosecutor’s Office has committed to ensuring transparency and the upholding of Swiss criminal laws, the confidence of investors and shareholders may have been undermined in the meantime.

FAQs

1. What are the potential risks of merging two large Swiss banks?

Acquisitions by large banks can cause market imbalances and allow for banks to make risky investments while receiving immunity from market fluctuations. Also, the merger can create a monopoly-like situation that eventually benefits shareholders, but not necessarily consumers.

2. What is the investigation about?

Swiss federal prosecutors are investigating whether government officials, regulators, and executives involved in the two banks have violated Swiss criminal law during the acquisition process.

3. What is the aim of the Swiss Federal Prosecutor’s Office?

The Swiss Federal Prosecutor’s Office aims to ensure that Swiss criminal law has been correctly followed during the acquisition process and to contribute to the establishment of an honest Swiss financial center.

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