(MENAFN) According to calculations by Bloomberg, Switzerland's decision to rescue Credit Suisse, a failing investment bank, could result in a significant financial burden for the nation's taxpayers. The Swiss government has promised to absorb 9 billion Swiss francs (USD9.7 billion) of the bank's losses and provide a 100 billion-franc (USD108 billion) public liquidity backstop from the Swiss National Bank (SNB). This means that each of Switzerland's 8.7 million residents will pay 12,500 francs (USD13,500) for the bank's rescue. Furthermore, the deal includes a separate guarantee of 100 billion francs from the Swiss central bank that is not backed by the government.
Taking into account the 50 billion-franc loan from the SNB that the bank secured last week, the total cost of the rescue will exceed 259 billion francs (USD280 billion), equivalent to about a third of Switzerland's entire economic output in 2022. This rescue will be Switzerland's largest ever corporate rescue, surpassing the 60 billion-franc bailout of UBS in 2008.
The decision to rescue Credit Suisse has sparked criticism from some experts, as the bank primarily services the ultra-wealthy and has engaged in extraordinary investment bank practices while paying its employees exorbitant salaries relative to the average citizen. A former global bank CEO expressed concern about the risk of putting taxpayers' money at stake to bail out a bank that operates in this manner.
The Swiss government will need to justify its decision to voters, as they face the prospect of having to pay for the bank's rescue, potentially placing a significant financial burden on citizens. The situation highlights the challenges and complexities of balancing the needs of the financial industry and the taxpayers who ultimately bear the cost of rescuing failing banks.
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