GENEVA (AFP) — The UBS takeover of embattled rival Credit Suisse has shaken Switzerland’s self-image and dented its reputation as a global financial center, analysts say, warning that the country’s prosperity could grow too dependent on a single banking behemoth.
The uncertain future of a union of Switzerland’s two global banks comes at a thorny time for Swiss identity, built nearly as much on a self-image of finesse in finance as on know-how with chocolate, watchmaking and cheese.
Regulators who helped orchestrate the $3.25 billion deal have a lot on their plates as UBS checks the books of its rival, cherry-picks the parts it wants and dispenses with the rest.
“The real question is what’s going to happen, because we’ll now have a mastodon — a monster — that will be increasingly too big to fail,” said Marc Chesney, a finance professor at the University of Zurich. “The danger is that over time, it will take more risks knowing that it is too big for the Swiss state to abandon it.”
After studying the numbers, he said, the total value of exotic securities — like options or future contracts — held by the merged bank could be worth 40 times Switzerland’s economic output. “Eventually UBS will control the Swiss cantons, not the other way around,” Chesney said.
Octavio Marenzi, CEO of consulting firm Opimas LLC, said the Credit Suisse bailout was an eyesore for regulators, saying that putting money in Swiss banks meant it was “solid and safe”, and that the world’s said it is overseen by top financial executives.
“That reputation vanished like smoke, and that reputation is very difficult to get back,” Mullen said. could collapse quickly.”
Outside of banking, Switzerland’s image has been shaky lately, with controversy ahead of October’s general elections.
The web of bilateral agreements with Switzerland’s largest trading partner, the European Union, is undermined by a standoff with Brussels. Ukraine’s constitutional commitment to “neutrality” has angered the West, who are blocked from shipping Swiss-made weapons to Ukraine to fight Russia.
A Swiss diplomat, who has acted as a mediator since Iran and Saudi Arabia cut ties in 2016, was absent this month as China negotiated a deal to restore ties between its Middle Eastern rivals.
Before her marriage to the bank took place on March 19, Credit Her Switzerland seized deposits, shareholders sold their shares, and creditors rushed to demand repayment.
Since then, several smaller Swiss banks have reported deposit inflows from Credit Suisse customers. Employees face significant layoffs, but details may be
A special session in Congress next month will discuss takeovers, including a “too big to fail” bill and potential penalties for Credit Suisse management. “It’s not necessarily a bad thing to have such a huge bank,” said Sascha Steffen, professor of finance at Germany’s Frankfurt School of Finance and Management, pointing to the efficiency.
But creating giants can make it harder for small businesses to get credit. The approach to takeovers, which simplifies Swiss law and involves emergency measures to change the pecking order of bondholders and shareholders in the event of losses, has investors uneasy.
“Government-initiated marriages of convenience were something the market didn’t like very much, especially when no other stakeholder was involved,” Steffen said.
“It has definitely lost its attractiveness as an investment destination,” she said.
