Credit Suisse rescue package rejected by Swiss parliament

BERN  -Switzerland’s parliament rejected on Wednesday the government’s 109 billion Swiss francs ($120.82 billion) aid for Credit Suisse‘s merger with UBS, leaving the fallen bank’s hastily arranged rescue without a largely symbolic parliamentary blessing.

While the upper house had approved the government’s contribution to the rescue package, parliament‘s lower, and larger chamber, pushed back again on Wednesday.

It had already rejected the proposals in a late night session on Tuesday, forcing the upper house to find a solution when it met again on Wednesday.

Seeking a compromise, the upper house passed changes to the measure on Wednesday morning, but it was not enough to sway the lower house lawmakers.

They turned it down by 103 votes to 71 in favor, a similar level of opposition to the night before.

Speaking just before the lower house vote, Cedric Wermuth, the co-president of the Social Democrats said the party just could not support the funding.

While the government’s commitment, made using emergency law, cannot be overturned, the vote marks a symbolic rebuke for the authorities, whose decision to largely bypass the nation’s legislative has angered many politicians.

“This decision has no impact on the takeover of Credit Suisse decided on March 19,” the Swiss Finance Ministry said after the vote.

The support package had already been given binding approval by the parliament‘s finance delegation, due to the urgency of the matter, it said.

“The funds have already been fully committed,” it added.

Lawmakers who backed an approval of the deal, voiced concern about Switzerland’s image.

“It doesn’t really matter what we decide in detail, but it would really send a bad signal if these loans were rejected,” said Eva Herzog, who is a member of the Council of States, the upper house, before the vote.

Following a day of heated debates held in the country’s four national languages, that continued into early morning hours, the upper house passed changes aimed at winning over the skeptics.

They included a proposal for Switzerland’s federal government to draft an amendment to the country’s Banking Act. Its aim would be to reduce the risks posed by systemically relevant banks, such as Credit Suisse and UBS for Switzerland, by, for example, raising capital requirements and restricting bonuses.

Addressing parliament before the vote on Wednesday, finance minister Karin Keller-Sutter told lawmakers to consider what message their rejection of the rescue would send to the world.

“What signal do you want to give internationally, are the institutions reliable, do you value financial market stability in a place where you already have a financial cente with a certain importance?”

Lawmakers were recalled to the country’s capital, Bern, for the rare extraordinary session to discuss the Swiss government’s open checkbook response to a collapse that many in the country have blamed on Credit Suisse‘s top management.

Last month’s shotgun marriage which saw the bank taken over by rival UBS for 3 billion Swiss francs and propped up with more than 250 billion Swiss francs in guarantees and support has drawn widespread criticism.

The government invoked Swiss emergency law to sign it off to the ire of the almost 250 lawmakers left without a say.

“The use of emergency law has reached a level in the last three years that is beginning to annoy me,” Hansjoerg Knecht, a member of Parliament‘s upper house, said on Tuesday.

($1 = 0.9022 Swiss francs)

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