Contents
Not even the enemies of Credit Suisse would have wished for this end: trust lost, branded as a scandalous bank, forced to sell to the rival. The disaster is complete. CS has recently been in such a desolate state that UBS will only buy it if the federal government guarantees billions in losses.
All of this is unfortunate for the staff, the customers, the investors.
Possibly too big for the state
The general public also gains nothing in a first step. On the contrary: now the new, even bigger UBS is definitely too big to fail. It may even be “too big to bail”, i.e. too big for the state to be able to save in a crisis.
Nevertheless, one can ask oneself whether it is not better that way for everyone involved. Because now the CS is at least cleaned up thoroughly. One thing is clear: external circumstances were not to blame for CS’s downfall, nor was it bad luck, but the management. It has failed for years.
If the CS bosses had had the risks better under control, CS would still exist as an independent bank today. But that’s the end of it – after 167 years of more or less glorious history.
A departure from the pursuit of risk?
The most recent scandals and losses, the rapid outflow of funds, the many lows in recent months were all systematic: CS notoriously took excessive risks and controlled these risks inadequately.
In full-page newspaper advertisements, UBS promises to change this. It prescribes a reform of the risk culture for CS.
The advantage: there is at least a chance of improvement. With a bit of luck and a lot of skill, UBS can even make significantly more out of CS’s business than CS itself.
Not just UBS – others could benefit too
Many of the rich and super-rich at home and abroad who had entrusted their assets to CS will bring the money to UBS. In Latin America, for example, where CS’s wealth management was quite successful over long stretches, UBS tended to strengthen itself with the takeover.
It will be less easy for UBS to convince CS corporate clients. Some SMEs and corporations that would have preferred to continue to have an independent CS as their house bank will migrate to the competition. Larger cantonal banks are likely to benefit from this, as well as foreign financial institutions that already have Swiss companies as customers.
Private customers in Switzerland also still have enough choice, at least that’s how UBS puts it. So far, the authorities have not openly and decisively opposed this.
The key question is: Does UBS live up to its claim to be the better bank. If so, everyone would have won something.