UBS’s emergency takeover of its troubled Swiss rival Credit score Suisse, with important backing and arm-twisting from Bern, sparked fears Monday it may weaken the nation’s largest financial institution and monetary sector as an entire.
Switzerland was in shock after its largest financial institution had agreed underneath strain from Swiss authorities to swallow up the second largest for $3.25 billion, in what the federal government insisted was a significant step to forestall financial turmoil from spreading all through the nation and past.
Swiss media and politicians alike expressed outrage felt that one of many nation’s oldest and most iconic banking establishments went poof, insisting that regardless of a string of crises and scandals, it may have been saved.
Swiss authorities confronted criticism for reacting too slowly as Credit score Suisse — seen because the weakest hyperlink in European banking after a number of years of unrelenting scandals and crises — noticed its share value implode final week amid market turbulence over the collapse of two US banks.
On the worst day of buying and selling Wednesday, when Credit score Suisse noticed it share value drop to historic lows, the central financial institution and regulators took a full day to announce a $54-billion lifeline for the financial institution, and the federal government waited till Sunday night to talk publicly in regards to the debacle.
‘Historic scandal’
Thierry Burkhart, head of Switzerland’s rightwing Liberals celebration, described the deal as “shameful for Switzerland”, and mentioned Sunday was “a dark day for the Swiss financial sector and for Switzerland as a whole.”
The Tages-Anzeiger each day in the meantime slammed the deal as “a historic scandal”, whereas the Tribune de Geneve mentioned it was a “waste, socially (for jobs), economically (for the reputation of the country), and shameful politically for the politicians who were too slow to act.”
Many acknowledged although that when push got here to shove, there had been little selection. The federal government had mentioned the one different to the UBS deal was a full nationalisation of Credit score Suisse.
The deal was the “best solution for restoring the confidence that has been lacking in the financial markets recently”, Swiss President Alain Berset instructed reporters Sunday.
If Credit score Suisse went into freefall, it might have had “incalculable consequences for the country and for international financial stability”, he mentioned.
UBS in the meantime is getting into this compelled marriage in full well being, having raked in a $7-billion web revenue in 2022.
‘Significant risks’
However the mega-merger just isn’t with out danger for the establishment and past.
Whereas “the deal could draw a permanent line under the Swiss banking sector’s problems,” Capital Economics analyst Andrew Kenningham cautioned in a word that “the track record of shotgun marriages in the banking sector is mixed.”
“Further substantial losses in the legacy bank cannot be ruled out and this could affect confidence in the enlarged UBS and/or prompt demands for further state support.”
Vontobel analyst Andreas Venditti agreed.
“There are many uncertainties and significant risks,” he wrote in a word, warning that “the UBS investment case changes substantially.”
“The issues currently impacting the global banking sector are not over.”
UBS was already the worldwide wealth administration chief, however the deal will create a behemoth managing a complete of round $3.4 trillion.
The merger may even have dire penalties for jobs in Switzerland, the place UBS and Credit score Suisse have important overlap of their companies, and every with their very own department workplaces in each Swiss city and village.
A commentary piece within the Neue Zurcher Zeitung in the meantime voiced alarm that authorities have been permitting UBS, already a behemoth on the world stage, to balloon additional, making it “even more too big too fail”.
“A zombie is disappearing, but a monster is in the process of being born.”
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