Swiss government plans to install Sergio Ermotti as Credit Suisse chairman

Receive free financial services updates

we will send you one myFT Daily Digest Latest Email Rounding financial Services News every morning.

The Swiss government plans to install Sergio Ermotti as chairman of Credit Suisse in case it is forced to nationalize the troubled bank.

Ermotti was finally brought back as chief executive of UBS in March, just days after Credit Suisse was saved from collapse, in a deal that removed the need for Swiss authorities to take state control of the 167-year-old lender and test bank failure rules following the global financial crisis.

Swiss authorities – including the finance ministry, the national bank and financial regulator FINMA – pushed hard to get UBS to take over its ailing rival in mid-March, but they have been drawing up detailed contingency plans since Credit Suisse was hit by a loss-making bank operation in October, according to three people with knowledge of the preparations.

The plans included drawing up a shortlist of financial executives who could be appointed as chairman of Credit Suisse and allowing him to bring in his own emergency executive team.

According to the same people, Ermotti was at the top of the list and talks between the 63-year-old banking executive and representatives of the Swiss government took place in the days leading up to Credit Suisse’s collapse.

But while the fate of Credit Suisse was being negotiated over the weekend of 18 and 19 March, Switzerland’s Federal Council decided that nationalization of the bank would not be an option as similar moves by the UK, Dutch and Irish governments following the global financial crisis had proved costly and time-consuming.

The alternative plan was to deal with Credit Suisse if the takeover by UBS failed, a form of insolvency proceedings that has not yet been tested on a major global bank since the financial crisis.

Under the resolution plan, FINMA would have taken over control of Credit Suisse and the bank’s equity and additional Tier 1 bonds would have been liquidated. People with knowledge of the plans said its bail-in bonds would have been converted into equity.

The people said FINMA would make changes to Credit Suisse’s board and management team with the aim of speeding up the closure of its investment bank – although slower than what is currently being planned by UBS.

The Swiss authorities had already prepared the ground for a settlement by preparing a necessary decree. The Federal Council also drafted legislation to allow Credit Suisse to provide huge liquidity backstops as customers pulled tens of billions of assets a day.

The government began tightening measures after a bank run in October when Credit Suisse suffered outflows of more than $100 billion in just weeks following social media rumors about its financial health.

Ermotti had been chief executive of UBS for nine years until 2020, but was brought back to replace his successor Ralf Hammers just days after Credit Suisse agreed to take over, recognizing the enormity of the task of combining the two banks.

The deal is the first time two global systemically important financial institutions have been brought together.

Ermotti is scheduled to set forth his plans for the combined business at UBS’ second-quarter results on August 31.

Credit Suisse, UBS, Ermotti, FINMA and the Swiss finance ministry all declined to comment.