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The Losers

1. Job Cuts at the Expense of CS Staff

(Image: Keystone)

CS employees are the main losers. Although UBS’s management relentlessly reasserts that it will continue to employ the most suitable people from both banks, the current selection of managers and executives shows that UBS staff are more likely to make the grade.

This means that a significant proportion of the reported 35,000 job cuts worldwide could be at the expense of CS staff. 3,000 redundancies are also planned in Switzerland. UBS hopes to manage a large amount of these cuts through staff attrition. But this might be just an illusion. It should be clearer next summer who will have to jump ship.

2. «Annus Horribilis» for CS Shareholders

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2023 was the «annus horribilis» for CS shareholders, who lost a lot of money with the forced sale of their bank. Many have entered into a legal battle with CS. The fact that various investor groups are pushing for compensation does not make things any easier.

While the Swiss federal government has to think about how it will be able to indemnify itself against the much larger «new» UBS in the future, the state could suddenly receive a bill running into the billions from the past. Unsurprisingly, this leads to the conclusion that «mega bank» UBS is too big for Switzerland (see point 3).

3. Switzerland Under International Pressure

(Image: Vlada Karpovich, Pexels)

The forced takeover has increased the risks for the Swiss economy. The new UBS’s total balance sheet assets account for around 210 percent of Switzerland’s GDP.

Some complain that the country is too small for such a giant bank (see also point 2) and ways need to be found to minimize the risks. Others believe that a pan-European solution is essential in the event of a crisis, with the countries in which UBS has a strong presence having to take part.

Either way, it will likely get uncomfortable. This is the conclusion also reached by the Organization for Economic Cooperation and Development (OECD) in its country assessment: «UBS – already a global systemically important bank before the merger – has thus become even larger and according to the «too big to fail» (TBTF) regulations, it must meet even stricter regulatory requirements,» it states in its paper.

4. «Orderly Death of Banks»

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The Swiss financial market authority did not make a good impression during the CS crisis, leading politicians and authorities to discuss tightening supervisory rules. It was revealed last week that even the Swiss Bankers Association (SBA), the umbrella organization of Switzerland’s banks, is no longer standing up to it.

The SBA supports the supervisory authorities’ request for additional disclosure of enforcement actions, as SBA Chairman Marcel Rohner and Director Roman Studer emphasized at the annual media conference, also reported by finews.asia. It must also be ensured that «the death of a systemically important bank can happen in an orderly manner,» says Studer. 

5. Switzerland’s Reputation

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The forced takeover of CS is not a good advertisement for the Swiss financial industry. According to a report by the Swiss Federal Department of Foreign Affairs (FDFA), the debacle and rescue resulted in rarely seen foreign media coverage.

It has often been argued that CS’s demise has seriously damaged the entire Swiss financial industry. However, the storm has since died down. This could have to do with the media coverage.

Many financial institutions are said to be feeling the consequences in their day-to-day business. Clients are increasingly avoiding Swiss banks. The slump in earnings at UBS Asia is apparently also due to nervous clients who have withdrawn some of their money, finews.asia has learned from various sources.