The merger of UBS and Credit Suisse, two of the largest and most prestigious banks in Switzerland, has been completed in June 2023, creating a new banking giant that aims to dominate the global financial market. The deal, which was orchestrated by the Swiss government and regulators to prevent a possible collapse of Credit Suisse after a series of scandals and losses, has raised many questions and challenges for the future of the Swiss banking industry.
How the merger happened?
The merger of UBS and Credit Suisse was announced on March 19, 2023, after the Swiss Federal Department of Finance, the Swiss National Bank and FINMA, the Swiss financial market supervisory authority, asked the two banks to enter into a merger agreement. The government issued an emergency ordinance that allowed the merger to be implemented without the approval of the shareholders.
The main reason behind the merger was to save Credit Suisse from bankruptcy, as the bank was facing massive losses and lawsuits due to its involvement in several financial scandals, such as the Archegos Capital Management debacle, the Greensill Capital collapse and the Mozambique debt fraud. The bank also suffered from a lack of trust and reputation among its clients and investors, as well as a weak capital position.
UBS, on the other hand, was in a relatively better shape, as it had successfully restructured its business model after the 2008 financial crisis and focused on its core strengths in wealth management and investment banking. UBS also had a stronger balance sheet and a higher market valuation than Credit Suisse.
The merger was seen as a way to create a stronger and more resilient Swiss bank that could compete with other global players, such as JPMorgan Chase, Goldman Sachs and HSBC. The combined bank would have assets of over $3 trillion, revenues of over $50 billion and profits of over $10 billion. The merger would also create synergies and cost savings of over $10 billion over the next few years.
How the merger affects the Swiss banking sector?
The merger of UBS and Credit Suisse has significant implications for the Swiss banking sector, which is one of the pillars of the Swiss economy and a source of national pride. The merger reduces the number of major banks in Switzerland from four to three, as UBS absorbs Credit Suisse’s domestic operations, while its international businesses are spun off into separate entities.
The merger also raises concerns about the concentration of risk and power in one bank, which could pose a systemic threat to the financial stability of Switzerland and beyond. The new bank would be too big to fail, meaning that if it faces any problems in the future, it would require another government intervention or bailout. The merger also reduces the diversity and competition in the Swiss banking market, which could affect the quality and innovation of financial services for customers.
On the positive side, the merger could also create opportunities for growth and expansion for the new bank, as well as for other smaller banks in Switzerland. The new bank would have more resources and capabilities to invest in new technologies, products and markets, as well as to attract and retain talent. The new bank would also have more leverage and influence in global regulatory and policy discussions, as well as in international alliances and partnerships. The merger could also open up space for other smaller banks in Switzerland to fill in the gaps left by Credit Suisse’s domestic operations, such as catering to specific customer segments or niches.
How the merger affects customers and employees?
The merger of UBS and Credit Suisse also has direct impacts on customers and employees of both banks. For customers, especially those who have accounts or relationships with both banks, they may face some changes or disruptions in their services or products, as the two banks integrate their systems and processes. They may also have to deal with different terms and conditions, fees or charges, or contact points. However, they may also benefit from a wider range of offerings, better prices or quality, or more convenience or security.
For employees, especially those who work for Credit Suisse’s domestic operations, they may face uncertainty or anxiety about their jobs or careers, as the new bank plans to cut 3,000 staff positions in Switzerland in the coming years. They may also have to adapt to a new culture or environment, or learn new skills or roles. However, they may also have opportunities for career development or advancement within the new bank or elsewhere.
The merger of UBS and Credit Suisse is a historic event that marks a new era for Swiss banking. It is a result of both external pressures and internal challenges that forced two rivals to join forces. It is also a source of both risks and opportunities for all stakeholders involved. It remains to be seen how the new bank will perform and evolve in the future.
