Hong Kong/Shanghai – In a strategic maneuver to circumvent potential regulatory conflicts stemming from its merger with UBS, Credit Suisse has decided to scrap its long-standing plans of establishing a locally incorporated bank in China, according to two credible sources familiar with the matter.
Over the course of several years, Credit Suisse had meticulously devised a blueprint for establishing a wholly owned local bank in China. This venture aimed to bolster the bank’s presence in the country by facilitating the establishment of a branch network, attracting deposits, and expanding its onshore wealth management operations.
Presently, the Swiss banking giant operates within China’s securities joint venture, providing an array of services including wealth management, securities brokerage, and investment consulting to its esteemed clientele in the world’s second-largest economy.
However, after extensive preparations, Credit Suisse has made the difficult decision to abandon its pursuit of a license to establish the anticipated locally incorporated bank. Sources reveal that this course reversal stems from the fact that UBS, who is acquiring Credit Suisse in a government-led rescue effort, already possesses a locally incorporated bank in China.
In China’s regulatory framework, a financial institution can only obtain a single license of this nature, prompting Credit Suisse to reconsider its plans. While both Credit Suisse and UBS declined to comment on the matter, the National Financial Regulatory Administration of China did not immediately respond to Reuters’ request for a statement.
Although it remains unclear whether local regulators have been formally notified of this decision, insiders suggest that the bank’s local staff has been apprised of the development. It is possible that Credit Suisse’s decision to abandon its local bank project could set a precedent for similar actions by both Credit Suisse and UBS in other business sectors such as asset management and brokerages, where they maintain operational units, all in an effort to ensure compliance with regulatory requirements.
The acquisition of Credit Suisse by UBS, a financial behemoth boasting assets twice the size of its counterpart, was initiated through a stock purchase valued at 3 billion Swiss francs ($3.3 billion). Additionally, UBS has committed to assuming up to 5 billion francs in losses. This merger, orchestrated by Swiss authorities, aims to prevent any contagion within the global banking sector.
