Account freezes and withdrawal limits – that could threaten CS customers

According to Bernhard Koye from the Swiss NextGen Finance Institute, it is unlikely that CS customers will officially be among UBS customers tomorrow morning: “In practice, such a merger cannot be carried out within a day. The UBS system is neither designed nor prepared to take over all clients of CS immediately.» It is more realistic that the merger will take place during a transition period of several weeks, with the details being decided at this point.

According to Koye, nothing will change for CS customers during this period. “Until the merger goes through, CS customers will continue to be able to log into CS e-banking and keep their bank cards.” However, a temporary freezing of the CS accounts cannot be ruled out: “The accounts could be frozen for three to five days. This is necessary to prevent a bank run, »says Koye. However, not all of the money will be frozen: “It is most likely that a one-off withdrawal limit of CHF 10,000 will be set during this temporary freeze so that customers can continue to cover their expenses,” says Koye.

“The CS shares can be converted into UBS shares in a merger,” says Koye. In principle, an intrinsic value for the shares is always calculated and negotiated in a merger: “CS shareholders can then decide whether to accept the offer or not. If they don’t take it, then their stock shares will go public Monday morning and likely drop a lot in value. In the trade, for example, foreign companies could also buy the shares.” According to Koye, the new value of CS shares could be significantly lower than the current one: “I can imagine a value of 25 centimes.”

It is rather unlikely that a big bank like CS will go bankrupt. After the 2008 financial crisis, the too-big-to-fail contingency plan was introduced. This means that the systemically important Swiss business of a large bank must be separated and continue to function independently. After all, financial market participants can become so important at national or international level that their disorderly failure can impair financial stability and force a state bailout. There are currently five systemically important banks: UBS, Credit Suisse CS, Postfinance, Raiffeisen and Zürcher Kantonalbank.

According to the Swiss Financial Market Supervisory Authority (Finma), in the event of bankruptcy, privileged deposits of up to CHF 100,000 per customer are paid out to bank customers as quickly as possible from the bank’s liquid assets. If the liquid funds are insufficient, Esisuisse, as the body responsible for deposit insurance, finances the payment of deposits at Swiss branches up to a maximum of CHF 100,000 per creditor. Securities are held by the bank but are the property of the customer. In the event of a bank failure, they are issued to the customer.

If the customer’s balance exceeds a total of 100,000 francs, the excess amount goes into the third bankruptcy class for unsecured claims in the event of bankruptcy of the bank. At the end of the liquidation proceedings, the customer usually receives a portion of the original balance that was included in the third class of bankruptcy.