© Reuters. FILE PHOTO: The Credit Suisse bank logo is seen outside its office building in Hong Kong, China, March 20, 2023. REUTERS/Tyrone Siu
By Tom Sims and John Revill
ZURICH (Reuters) – Switzerland woke up to a new era on Monday after UBS bought Credit Suisse in a government-brokered bailout that dented the country’s pride in its banking expertise.
An association of bank employees said it was deeply shocked by the potential consequences of the deal to save 167-year-old Credit Suisse after customer and market confidence in the lender evaporated.
In a package orchestrated by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for Credit Suisse and take up to $5.4 billion in losses.
With their headquarters just a few minutes’ walk from each other, not far from Lake Zurich in the city center with snow-capped mountains on the horizon, the two lenders have been mainstays of global finance for decades.
The banks, two of the most systemically relevant in global finance, hold combined assets of up to 140% of Swiss gross domestic product, according to the central bank, in a country that relies heavily on finance for your economy.
Chart: Bank Exposure Bank Exposure https://www.reuters.com/graphics/CREDITSUISSE-CRISIS/zgvobarewpd/chart.png
The Association of Swiss Bank Employees, in a statement to Reuters, demanded that UBS keep job cuts to an “absolute minimum.”
“The jobs of many employees are at stake,” he said, adding that he was in contact with management.
The statement underscores the sense of unease in Switzerland, with its reputation as a global financial center at stake.
Green Party lawmaker Gerhard Andrey said Credit Suisse is “such a visible institute.”
“This puts us in a very difficult situation as a country,” he said.
Some expressed concern about UBS’s dominant position.
Tobias Straumann, a professor of economic history at the University of Zurich, said it was “surprising” that the authorities did not make special provisions to deal with competition.
The Swiss media were also shocked by the events.
“A zombie has gone but a monster has been born,” read the headline of a comment in the Neue Zuercher Zeitung, often seen as the voice of the establishment.
“A few months ago, no one would have thought that Credit Suisse would fail. However, it is not an accident,” the newspaper wrote in the article accusing the bank of arrogance and pride.
“The Swiss bank had a market value of CHF 100 billion in 2007, of which CHF 7 billion was left last Friday,” he said.
“Therefore, there has been massive destruction of value, at the hands of managers who have carelessly underestimated the risks and helpless board members who have too often been unable to control things.”
The Tages-Anzeiger newspaper described the affair as a “historical scandal”.
“The federal government, the financial supervisory authority and the national bank allowed themselves to be swindled by UBS,” the newspaper wrote.
“The new megabank has the advantages: taxpayers, customers and employees have the disadvantages,” the newspaper added in an editorial, warning of brutal job cuts to come.
Still, UBS Chief Executive Ralph Hamers, who will lead the newly combined entity as chief executive, was confident his bank was up to the challenge of making the acquisition a success.
“The acquisition means we are bringing stability and security back to CS customers,” Hamers said. “But also that we are defending the reputation of the Swiss financial center.”
Other Swiss banks were positioning themselves in a new pecking order in Switzerland’s banking landscape as Credit Suisse, previously the No. 2 bank, falls by the wayside.
“Zeurcher Kantonalbank offers all the business areas of a universal bank and is therefore a complement to the large emerging bank,” CEO Urs Baumann wrote on Linkedin.
