M&A as banking resolution tool: returns of experience from Switzerland and the European Union

This article investigates mergers and acquisitions as banking resolution tools, looking at the main cases that happened between 2008 and 2023 in Switzerland and the EU. This track record is composed of five main cases, it gathers mergers and acquisitions directly ordered by a resolution authority under a resolution scheme (resolution cases), or simply supported by a resolution authority out of a resolution scheme (non-resolution cases). This track record includes the largest case in recent history, i.e. the non-resolution acquisition of Crédit Suisse by UBS in 2023. The analysis of these past cases confirms that mergers and acquisitions are effective in rescuing ailing banks while preserving the stability of the financial system. The Swiss and EU returns of experience highlight, however, a high litigation risk, primarily with investors (shareholders and bondholders), whose information on resolution plans can be further strengthened to mitigate their propensity to go to Court, while an “always-worth-trying” strategy from them to gain compensation in Court cannot be fully removed. The Swiss return of experience opens up new resolution horizons by raising the question of “surrogate resolution”, i.e. an ailing bank is integrated in another bank and is then spun off when back in good shape.