The call for banking separation ("Trennbanken") is getting louder in Switzerland after the Credit Suisse (CS) debacle. When officials of the Swiss financial regulator, Finma, called a press conference yesterday, journalists questioned the reason for the event, asking whether it was “because you fear the call for a banking separation.” They also asked, “When did the USA start to apply pressure” to bailout Credit Suisse in order to avoid a systemic contagion?
While Finma head Prof. Dr. Marlene Amstad simply ducked the first question, CEO Urban Angehrn addressed the second: “There was no pressure from the USA to bail out CS. We were always in a dialogue with US officials, but we did not need pressure from abroad. We had to do what is right for Switzerland, and it was right for the USA as well.” Thus he indirectly admitted that the CS bailout has avoided the worst for the USA.
The same day, economist Hans Geiger called on the government to implement bank separation. In a video interview with Zurich financial site iinsideparadeplatz, he stated that, “with a bank separation system, this crisis would not have occurred.” Therefore, he said, the government must now act. The investment banking of UBS, which bought up Credit Suisse, must be separated and cut off from central bank liquidity; as anything else would be high-risk.
It is expected that the issue of bank separation will be raised by some legislators at the special joint session of parliament next week.
