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UBS demonstrates strength and new self-confidence. The takeover of Credit Suisse is a major construction site for UBS, which will keep it busy for a long time until all of CS’s open legal cases have been settled.
Nevertheless, the bank now seems to have more clarity about the condition of the competitor that was taken over in an emergency, in particular about the risks that are dormant in CS’s books. UBS is now using this situation to confidently repay the financial aid granted by the Confederation and the National Bank (SNB) and no longer have to claim their guarantees.
Bad news for jobs
Ultimately, UBS separated from the two institutions and created more entrepreneurial freedom. This is of great importance, especially with a view to the future of CS Switzerland. Here, UBS will now be able to act largely hands-free. UBS will do this based on business considerations and regardless of nostalgic sensibilities.
In concrete terms, this means that it will cut thousands of jobs at home and abroad. For many CS employees – especially in Switzerland – the forced takeover of CS by UBS does not have a happy ending.
Good news for the federal government and taxpayers
The Confederation and the National Bank, in turn, are now relieving themselves of a great burden. A burden that they reluctantly shouldered in the spring to avert greater disaster: the federal government and the National Bank had to support UBS with over 200 billion francs to protect the reeling CS from an uncontrolled collapse. A company, nota bene, that got into this situation through years of self-infliction.
It was a risky adventure with an unknown outcome. Fortunately, things turned out well for both institutions – and ultimately also for taxpayers. Very good, in fact, if you look at the 700 million Swiss francs that UBS/CS had to pay the Confederation and the National Bank as compensation for the financial aid and guarantees they provided.
The step was also risky because at the time of the takeover it was completely unclear how bad the condition of CS actually was. It was just as uncertain whether the looming banking crisis in the USA would spread further and even trigger a global banking or financial crisis.
Are the reforms coming now?
It remains unclear how things will continue politically. Will the planned reforms relating to banking regulation, the bonus culture and the “too big to fail” issue be continued and tackled promptly, or will they be put on the back burner? Central to this is the question of how politicians and authorities intend to have the new UBS under control in the future so that they do not have to embark on an even more daring adventure to save the new banking colossus.
With its new size and self-confidence, UBS will want to have a say in this debate. But the bank would do well not to push the boundaries too far, despite the freedom it has regained.
Matthew Heim
business editor
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Matthias Heim studied economic history. He has been working for Radio SRF since 2007 and has been a business editor since 2016. His areas of specialization are aviation, tourism, transport, retail and energy.