Socially (ir)responsible
Credit Suisse jobs cuts and (Swiss) socialists
Dear Insider,
The numbers are brutal.
UBS has let it be known that it intends to axe over 30’000 jobs as part of its Credit Suisse takeover. Many have already left and flooded the job market - both in Switzerland and abroad.
Executives at the new mega bank are not unaware of the implications of their decision - but they don’t seem to care too much. This calls into question their civic responsibilities and their sensitivity to the individual needs of those they let go.
But big bankers are rarely mistaken for socialists - and whatever their political stripes - feelings of socially responsibility by the financial elite are hard to discern.
Maybe Alain Berset - who recently stepped back from politics - has something in common with Colm Kelleher: a desire to be “irresponsible” and free from dead weights.
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Quick hits:
➡️ Moving on
Swiss Federal Councilor Alain Berset announced his resignation from the country’s seven-person Bundesrat effective in September. As Interior Minister, Berset was responsible for healthcare and in particular the country’s covid-19 policy. He faced growing criticism over a number of scandals resulting from his policies and their implementation.
% Up but slowly
The Swiss National Bank continued its rate hikes, though at a slower pace, with a 0.25% bump. SNB President Thomas Jordan had already indicated that the central bank was prepared to raise interest rates again in an effort to combat inflation. While the US Federal Reserve halted its rate increases, Switzerland moved in line with the European Central Bank and the Bank of England.
😬(Un)Justified?
In response to the first increase in Switzerland's rent reference interest rate in 15 years, a considerable influx of tenants have sought advice from legal hotlines on rent increases allowed under existing contracts. Worringly, estimates from AXA-Arag suggest a tenth of these increases could be unfounded, raising alarm about potential exploitation in the nation's rental market.
6️⃣ Not quite tops
The annual ranking of the world's most liveable cities by The Economist Group placed Zürich in sixth place, with Vienna taking the top spot for the fourth time in five years. The ranking is based on 30 criteria in the areas of stability, healthcare, culture and environment, education, and infrastructure.
⚖️ Collectively responsible?
A class action lawsuit has been filed by European AT1 bondholders against former Credit Suisse executives, including Brady Dougan and Tidjane Thiam in a New York court. The bondholders, affected by the bank's $17 billion writedown on AT1 bonds as part of the takeover deal with UBS, allege that the executives engaged in excessive risk-taking and unethical practices.
💡The Point:
👉 The class-action lawsuit launched by AT1 bondholders against former Credit Suisse executives reveals significant issues underpinning the complex and often opaque world of high finance. The significance of the action extends beyond the particular grievance - it highlights (once again) the “we are right” attitude that was so strong for so long at Credit Suisse. Depending upon the trial's outcome, Switzerland and its institutions may face increased scrutiny and regulatory pressure, potentially triggering large-scale changes in its financial regulatory landscape to safeguard against similar occurrences.
👉 Long known as a top destination for bankers and luxury shoppers, Zürich continues to rate highly for its overall standard of living. But some indications suggest that there is room for improvement - and even cause for worry. With rents going up, the city of Zürich stands to be hardest hit. Already rental properties are extremely hard to come by - at any price. Major brands (Jelmoli and Manor) in the downtown are packing their bags and moving out. If inflation stays high and costs are not kept under control, the inner city could look vastly different in the coming years.
The city of Zürich could look vastly different in coming years…for many reasons.
👉 The end of an era is never easy. But Alain Berset’s decision to step down from the Federal Council comes as no great surprise. After the enormous pressures of the pandemic and the ensuing controversy around his leadership, Berset will be glad to move on and shed his heavy responsibilities.
The question is whether the SP party will benefit from fresh blood - or suffer from the loss of a well-known face. The nature of Swiss politics means that no single person is completely irreplaceable - so SP may not mourn Berset’s departure. But with a strong push from the Green Party vying for one of the two Federal Council seats held by the left, SP will need to move quickly to shore up its standing.
💡The Insider Angle:
‘Power to the people’ is a popular - if not overtly used - refrain in Switzerland. Its referenda are its clearest symbol. That power and the common people’s profits came under attack when FINMA wiped out AT1 bondholders as part of the Credit Suisse rescue plan. Now the former big bosses of the once mighty Swiss bank will be made to answer to the people who got caught in the mess - including the bankers now hitting the street with a pink slip.
Normally left-leaning parties would benefit from a struggle between “the common people” and the elites. But the populist landscape is dominated by SVP and its right-wing majority. And with Berset’s departure, SP and the Greens will be less likely to take advantage of the Credit Suisse situation.
If the courts side with bondholders, there is a chance that big-name banking talent and ambitious managers will become even more risk-averse and “Swiss-shy” than before. This ultimately hurts the country’s competitiveness and puts it at a disadvantage vis-a-vis other up-and-coming financial centers like Dubai and Hong Kong.
We would love to hear your thoughts…!
➕The Bonus:
↔️ Coming together?- Planning has begun for the new, centralised structure of Migro Supermarkt AG. So far details are sketchy… (Link)
🚠 All connected - A new cable car system will now connect Zermatt with Cervinia in Italy. The cost - both for construction and for passengers (CHF 240) - is not small… (Link)
🛑 Stop of the strike - Employees at the Geneva Airport have ended their protest. But pay negotiations will still need to be completed. (Link)