Switzerland will allocate $280 billion to rescue Credit Suisse, which caused a shock among the country's politicians
Such a significant amount is a third of Switzerland's total GDP
Banks Credit Suisse and UBS may receive support from the Swiss authorities and central bank in the amount of more than 260 billion francs ($280 billion) as part of the merger of the two banks to protect the Swiss economy from global financial turmoil, according to the terms of the deal.
Such a significant amount is equal to a third of the country's GDP, Reuters writes.
The agreement provides for substantial support from the state in the form of three tranches of liquidity and loans. In addition, the Swiss authorities have pledged to cover potential losses from the takeover in the amount of up to 9 billion francs.
The total amount of support in the amount of 260 billion francs is equivalent to a third of the total Swiss economy, which last year amounted to 771 billion francs.
Switzerland's two largest political parties have sharply criticized UBS's takeover of its rival Credit Suisse, saying that the multibillion-dollar government support for the deal poses huge risks to the country.
Parties from across the political spectrum have expressed concern about the huge amount of money provided by the government and central bank for the deal.
Roger Nordmann, the leader of the Social Democrats (SP) in the lower house of the Swiss parliament, warned that the support package poses a "huge risk."
"The new UBS is also another huge risk – it will have more than 1,500 billion francs in assets, and that's just too much for Switzerland," he told Reuters on Monday.
The Social Democrats are the second largest party in the Swiss parliament and have two ministers in the country's ruling cabinet.
This criticism increases the pressure on the Swiss government, which is leading the deal, although it is unlikely to derail the takeover.
Nordmann said he was also concerned about job losses and blamed Credit Suisse's management for the bank's collapse.
"What happened is terrible for the credibility of Switzerland, – he said. – This is a warning to Switzerland about banks that are too big.
Meanwhile, the right-wing Swiss People's Party (SVP) said it was concerned about the billions now being sent to compensate for "the mistakes and theft of Credit Suisse's management."
"Everything must be done to ensure that the Swiss do not suffer from this deal," the party said in a statement.
The party, the largest in the Swiss parliament, which also has two members of the seven-member cabinet, demanded clear conditions for the deal.
"Otherwise, UBS will become the next dangerous restructuring case," the party said in a statement.
Read more about the "dangerous" deal in Mind's article "Historic deal with a catch: Swiss bank UBS buys troubled Credit Suisse for half the price. Why was it necessary and who risks losing their money?"
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