Swiss parliament grapples with compromise on UBS guarantees

THE two chambers of Swiss parliament are attempting to find a compromise on how to support government guarantees for UBS Group’s takeover of Credit Suisse Group after the lower house rejected the measure in a largely symbolic vote.

“What we should be doing is building a bridge,” said Erich Ettlin, a Center Alliance member in the upper house, which already approved the 109 billion Swiss francs (S$160.8 billion) in guarantees. “It would be dreadful signal if parliament rejects this.”

If lawmakers in both houses of parliament can’t reach a compromise, the bill will automatically fail. However, this won’t stop the takeover negotiated last month, as the government already got approval from a small group of senior lawmakers on the weekend the deal was hashed out.

Still, the lower house’s rejection – just before midnight on Tuesday – highlights the anger among lawmakers on both sides of the political spectrum ahead of national elections later this year. An overall rejection would send a signal of Switzerland’s legislative not backing the deal.

Lawmakers acknowledged that lack of power of actually influencing the deal.

“If we could really turn down the loans here, I believe nobody would hesitate,” said Eva Herzog of the Social Democrats.

That’s in line with the sentiment in the lower house last night.

“We have to realise that our country is unable to protect its financial centre by any means necessary,” said Thomas Matter of the Swiss People’s Party.

Here’s how the situation might be resolved: Before rejecting the guarantees, the lower house had added provisions that seek to adjust the banking law to limit the risks to the state from systemically relevant banks.

SEE ALSO

Credit Suisse takeover will turn UBS into wealth management ‘powerhouse,’ JPMorgan says

Swiss lawmakers criticise government on UBS-Credit Suisse deal

Credit Suisse job cuts must be frozen, union says

The lower house wants the upper to support this stipulation and Wednesday’s debate suggested that this would be forthcoming. The lower house could then approve it when it meets from 11.45 am local time in Bern.

The standoff is largely symbolic. The government had said that “if parliament refuses subsequent approval, it will be tantamount to a political reprimand for the financial delegation, with no legal effect.”

And just as a reminder: Switzerland’s executive isn’t made up of a coalition or an outright majority, but of seven ministers from the country’s four largest parties. They usually make decisions by consensus and try to find pragmatic compromises – often outside of party lines.

Ministers don’t publicly oppose government decisions, irrespective of their parties’ stance on a matter or how they personally voted behind closed doors.

This setup means that parliament offers parties the most high-profile platform to sway voters. BLOOMBERG