Sergio Ermotti's return to UBS initially appears to be a confidence-builder for Swiss politics. But there is a great danger the new CEO will be used for political intrigues.
With Credit Suisse placing itself under the protective care of UBS, the new banking colossus is under even closer scrutiny. Newly reappointed Sergio Ermotti knows how the wheels of Swiss politics turn and is very well connected to many opinion shapers and therefore should not be underestimated in the politically charged debate over the «monster» bank UBS.
With Ermotti's return, UBS is likely to have the explosive political situation surrounding the takeover under better control than it did with his predecessor. Ralph Hamers who only took over as CEO in November 2020, is still under investigation for suspected money laundering during his time at ING.
Public Support
The commuter newspaper «20 Minuten» (in German) collected comments from politicians about Ermotti's return. National Councillor and banker Thomas Matter of the SVP party called the appointment an excellent step and immediately added that the SVP demand that the majority of board members of large companies are Swiss citizens.
FDP National Councilor Hans-Peter Portmann saw the appointment as a strong signal for politicians to work together in finding a solution to the crisis.
Some Skepticism
SP National Councilor Sarah Wyss was surprised by the appointment and made clear demands of Ermotti. She said a social plan for the takeover of Credit Suisse was needed, UBS had to minimize the risks of the new large bank, and Ermotti had to drastically reduce or ban bonuses.
Sergio Ermotti (Image: Keystone)
These first reactions indicated Ermotti will find numerous slippery spots on the political parquet. At the same time, UBS is facing resistance from the population, a majority of which doesn't support the purchase of Credit Suisse backed by state guarantees.
Blowing off Steam
The extent of political interest can be gauged by the fact that parliament will be debating the takeover of Credit Suisse by UBS and the financial guarantees given by the federal government at an extraordinary session from April 11 to 13. Politicians will most likely be blowing off a lot of steam during the debate as they position themselves ahead of elections.
Among other things, the Federal Council's decision to grant 109 billion Swiss francs ($118.8 billion) in commitment credits to secure the merger will certainly be a topic of discussion. Another popular demand in Bern is for UBS to quickly spin off the Swiss business of Credit Suisse to strengthen competition in the Swiss banking center and prevent mass layoffs.
In addition, there is a danger that systemically important UBS poses a cluster risk for Switzerland. For many political commentators, the new UBS is not only «too big to fail» but also «too big to bail out.»
Parliamentary Investigation
For the first time in almost three decades, a parliamentary investigative commission (PUK) is likely to be initiated. In what will be only the fifth PUK in Switzerland's history, members of the National Council and Council of States will investigate in detail the role of the authorities in the Credit Suisse rescue starting this summer at the earliest.
The PUK members have far-reaching powers and may even inspect minutes of Federal Council meetings or confidential information. In addition, they can summon third parties such as top personnel from UBS or Credit Suisse. False statements before the PUK are punishable by law.
Political Intrigue
A PUK is considered to be the sharpest weapon of parliamentary oversight and is likely to bring the events surrounding the downfall of Switzerland's second-largest bank unsparingly to light.
However, a PUK is always about a demonstration of power. Shrewd party strategists can play symbolic politics and exploit alleged or actual misconduct for a long time. Given the national parliamentary elections scheduled for October, countless politicians will undoubtedly make use of this in their election campaigns.
Supervision with Sharper Teeth
Ermotti will also have to dance on eggshells with the supervisory authorities. The Swiss Financial Market Supervisory Authority (Finma) recently called for more far-reaching sanctions, such as the distribution of fines or punitive measures against errant managers.
Finma Director Urban Angehrn publicly complained that the hurdles in punishing individuals were very high and that the supervisory authority was limited.
