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FINMA defends its decision.

 

Credit Suisse
Hours after the deal was announced, other reg­u­lat­ors dis­tanced them­selves from the decision, fear­ful that it would endanger banks’ abil­ity to raise cap­ital. Enraged bond­hold­ers have pledged to sue the Swiss gov­ern­ment and Finma. Finma, the Swiss regulator, said yes­ter­day that all the con­trac­tual and legal oblig­a­tions had been met for it to act uni­lat­er­ally given the urgency of the situ­ation. «On Sunday, a solu­tion was found to pro­tect cli­ents, the fin­an­cial centre and the mar­kets,» Finma chief exec­ut­ive Urban Angehrn said.

«Res­ol­u­tion in those cir­cum­stances would have triggered a big­ger fin­an­cial crisis, not just in Switzer­land but glob­ally». AT1s are a type of hybrid instru­ment cre­ated after the crash of 2008 to give banks greater cap­ital flex­ib­il­ity in the event of crises. As part of the acquis­i­tion deal by UBS, the com­bined bank will receive SFr9bn of gov­ern­ment guar­an­tees and an SFr100bn liquid­ity life­line from the SNB. An addi­tional emer­gency gov­ern­ment ordin­ance issued by Bern on Sunday had fur­ther con­firmed the power to take decisions over ele­ments of a bank’s cap­ital struc­ture, Finma said.

Quinn Emanuel Urquhart & Sul­li­van and Pal­las Part­ners are among law firms rep­res­ent­ing bond­hold­ers that have pledged to fight the decision. Part­ner Richard East said that the deal was «a res­ol­u­tion dressed up as a mer­ger» and poin­ted to state­ments by the ECB and the Bank of Eng­land, which dis­tanced them­selves from the Swiss approach. «You know something has gone wrong when other reg­u­lat­ors come and politely point out that in a res­ol­u­tion would have respec­ted ordin­ary pri­or­it­ies,» he said.

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