Swiss punish banks after Swissair debacle

Some customers of UBS and Credit Suisse are reported to have moved their accounts to other Swiss banks

Consumer confidence in Switzerland's two largest banks, UBS and Credit Suisse, plummeted after a partial rescue plan for the Swissair Group failed to keep the airline's jets from being grounded for two days. Some flights resumed on Thursday after the government offered taxpayer funds for a bailout.

This content was published on October 4, 2001 - 10:48

Urs Ackermann, spokesman for Zurich Cantonal Bank (ZKB), Switzerland's third largest bank, said he has noticed "a growing number of UBS customers who are closing their accounts following the bank's dealings with Swissair" and choosing to deposit their money elsewhere.

In an interview with swissinfo, Ackermann said the country's two biggest banks "had simply not appreciated how their private customers in Switzerland would react" to the events which led to a 48-hour grounding of Swissair jets.

"Our new customers are telling us they feel personally wounded that their banks were unable to come up with a solution for the embattled Swissair," Ackermann added.

Banks under fire

The banks have come under fire for not doing enough to ensure that Swissair, which was placed in receivership on Monday, could keep flying until October 28, when its former regional subsidiary, Crossair, is due to take over the bulk of its routes.

When contacted by swissinfo, nobody at UBS was prepared to comment about the negative public reaction to its dealings with Swissair.

But in an internal memo on Wednesday, Marcus Ospel, chairman of UBS, rejected the public criticism levelled at his bank.

"UBS was held responsible for the grounding of the Swissair fleet," Ospel said, "but this assertion is anything but true."

Ospel argued the bank had repeatedly warned Swissair over the past six months that its situation was extremely precarious and that a restructuring would be unavoidable.

Ospel's comments came hours after an unprecedented attack on the banks by the federal government in Bern. The Swiss president, Moritz Leuenberger, said on Tuesday he was "profoundly disappointed in the behaviour of the banks".

Emergency cash injection

It emerged on Wednesday that the Swiss government and Credit Suisse had agreed to pay a share of an emergency cash injection to cover the cost of aircraft fuel. But the cash could not be transferred because nobody at UBS, whose approval was needed to make the payment, could be reached.

One day after the grounding of Swissair jets, the Swiss press also launched a broadside attack on the banks.

"With their clumsy, if not stupid or infamous behaviour, the banks have caused unbelievable damage to the trust in our economic system and the reputation of Switzerland and the Swiss airline industry," wrote the German-speaking paper, "Neue Zurcher Zeitung".

The "TagesAnzeiger" focused its attention on the Swiss government's inability to reach Ospel at the crucial moment to discuss an emergency bridge loan for the airline.

"Never before in the history of the Swiss federation has a democratically elected government been so humiliated by a banker as on October 2," the paper said.

Switzerland's four main political parties on Tuesday also criticised the banks for failing to provide the necessary funds in time to prevent the grounding of the Swissair fleet.

Several members of parliament accused the banks of arrogance because the financial institutions rejected a proposal by the government to jointly provide about SFr250 million ($154 million) in emergency credits.

Long-term repercussions

Ackermann says the long-term repercussions of the public backlash will be felt far beyond local branches of UBS and Credit Suisse.

"UBS has brought an image problem on the entire banking community in Switzerland. This is what is most sad about all this," he said.

The confidence of foreign customers in Swiss banks as a whole, argues Ackermann, is likely to suffer in the aftermath of the Swissair debacle.

"People looking at Switzerland now have the impression that the country is operating like a banana republic," Ackermann said, "and this will have anything but a positive effect on the Swiss financial sector as a whole."

Ramsey Zarifeh with agencies

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