Credit Suisse significant casualty in 2023 among global banks

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The current year marked the downfall of several global banks, with Credit Suisse being the most significant casualty. Despite its venerable history of over 160 years, the institution succumbed to a compelled takeover orchestrated by the Swiss government and UBS.

In a bid to avert a worldwide financial crisis, the Swiss government swiftly orchestrated UBS’s acquisition of Credit Suisse in March. However, the repercussions of the collapse of this Swiss banking giant, founded almost 167 years ago, are anticipated to persist well beyond the expeditious completion of the deal.

As reported by the Financial Times, Credit Suisse faces economic lawsuits amounting to $9 billion, with ongoing efforts to file numerous additional cases. The newspaper identifies three implicated parties: firstly, “Finma,” the financial regulatory body in Switzerland, which mandated the annulment of $17 billion worth of Tier 1 capital bonds while retaining some compensation for shareholders. This move disrupted the conventional hierarchy of capital sources.

The second party under scrutiny is the Swiss government, which holds investment treaties with 120 countries globally. Traditionally, these treaties aimed to shield Western investors from risks in emerging markets. However, the dynamics have shifted, with investors from emerging markets seeking compensation from the Swiss government responsible for engineering the rescue deal and enacting emergency laws to implement it.

The third party, according to the Financial Times, is UBS, perceived by some as the primary beneficiary of Credit Suisse’s collapse. Certain legal firms argue that Credit Suisse, now part of UBS, should have contested the legality of writing off the first-tier capital bonds and not capitulated swiftly under the purported pressure from Swiss authorities.

Legal actions against UBS extend beyond bondholders to encompass Credit Suisse shareholders. They are seeking redress for losses resulting from UBS’s negotiation to acquire Credit Suisse. This demand for compensation aligns with Swiss law, granting shareholders the right to seek reparation if they perceive the acquisition deal treated them unfairly or involved “deception.”

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