Switzerland is telling all kinds of fairy tales about why crisis-stricken bank Credit Suisse disappeared. The finance minister is talking herself into trouble.
Swiss Finance Minister Karin Keller-Sutter has revealed the ‘real reason’ for the collapse of Credit Suisse (CS).
In an interview at the World Economic Forum WEF 2026, she explained why the major Swiss bank disappeared in 2023.
Foreign subsidiaries as the cause
“The Federal Council is specifically addressing the weakness revealed at Credit Suisse of debt-financed foreign subsidiaries,” she told ‘Finanz und Wirtschaft‘ on Saturday, which is why the major bank UBS should now hold more equity capital after the emergency merger with CS.
Foreign subsidiaries would have to be fully backed by equity capital in the future so that a problem with the holdings would not jeopardize the parent company and thus the business in Switzerland, Keller-Sutter continued.
Ermotti spoke in riddles
Until now, however, the official Swiss line has been that CS went under due to a lack of liquidity.
Even the parliamentary investigation commission (PUK) ruled out any influence from abroad and did not even investigate that possibility.
UBS star banker Sergio Ermotti, who is pushing ahead with the CS integration, recently told Economiesuisse – to the astonishment of many present – that the real reason for CS’s collapse had not even been put on the table.
Battle plan devised
However, as muula.ch discovered, and practically the only media outlet to do so, CS recorded a billion-dollar write-off in the US before its demise began.
As a result, that US subsidiary of the crisis-stricken bank could neither be sold nor liquidated, because that would have resulted in the Swiss CS parent company having insufficient capital.
So, Switzerland and the Americans devised the emergency merger of CS with the major bank UBS, which they then implemented.
Alternative reveals more
But Finance Minister Keller-Sutter didn’t just talk herself into a corner on this point regarding the demise of CS.
Switzerland also suddenly admitted something new regarding the write-off of AT1 bonds by the Swiss Financial Market Supervisory Authority (FINMA).
To ensure that the major bank UBS does not have to fully back its foreign subsidiaries with equity capital, an alternative is currently being discussed whereby the foreign subsidiaries would be covered by a 50 percent allocation of AT1 capital.
Federal Administrative Court is right
“This proposal does not solve the problem and would do little to improve the current situation,” Keller-Sutter explained.
In an early phase of the crisis, only hard-core capital is decisive, as the conversion would be subject to defined conditions that would not yet be triggered, the finance minister continued.
But it is precisely this situation that is currently the subject of a case before the Federal Supreme Court, after the Federal Administrative Court overturned Switzerland’s decision to simply devalue the AT1 bonds during the emergency merger.
Higher interest payments
“If, on the other hand, the conditions for AT1 are set in such a way that conversion would also be possible at an early stage, investors would demand correspondingly higher interest rates,” Keller-Sutter continued.
However, this would hardly offer the bank any more advantages over hard equity, it was rationalized.
Furthermore, in the case of the emergency merger between CS and UBS, Switzerland did convert AT1 bonds into equity in the early stages of the banking crisis at that time.
Ultimately, all capital ratios at CS were fully met, as confirmed by both the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB).
Declaration of insolvency
And now, Keller-Sutter herself explained that, in the case of CS, the AT1 bonds would be regarded as equity capital.
Switzerland let CS shareholders off the hook, though, and only some bondholders had to suffer total losses of around 16.5 billion Swiss francs.
Keller-Sutter had even argued that the high interest rate justified the write-down risk when AT1 bonds were devalued.
But now the finance minister says the complete opposite, that AT1 bonds should have earned a return on equity like shares.
Truth lost in bits and pieces
With both statements, i.e., the billion-dollar write-off at the US subsidiary as the starting point of the banking crisis and the lack of a trigger for the AT1 write-down, official Switzerland is finally admitting the true circumstances surrounding the demise of CS.
This brings an end to all the fairy tales surrounding this sad chapter in the history of the Swiss financial market, and taxpayers can slowly but surely start lining up to pay the big bill.
January 26, 2026/kut./ena.
