On Monday, Switzerland woke up to a new era after UBS acquired Credit Suisse in a government-brokered deal. This has caused a dent in the country’s long-held pride in its banking expertise. The bank employee association was deeply shocked by the potential consequences of the deal as customer and market confidence in the lender evaporated. In the package, orchestrated by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for Credit Suisse and assume up to $5.4 billion in losses.
The two banks have been pillars of global finance for decades and hold combined assets of up to 140% of Swiss gross domestic product, making them two of the most systemically relevant banks in global finance, according to the central bank. The country is heavily dependent on finance for its economy.
The Swiss Bank Employees Association demanded that UBS keep job cuts to an “absolute minimum”. It stated that many employees’ jobs were at stake and that it was in touch with management. The statement underscores the sense of unease in Switzerland, with its reputation as a global financial center on the line.
Green Party lawmaker Gerhard Andrey said that Credit Suisse is “such a visible institute,” which puts the country in a difficult situation. Some expressed concerns about the dominant position of UBS. Tobias Straumann, professor of economic history at the University of Zurich, said it was “astonishing” that authorities did not make special provisions to deal with competition.
Swiss media was also shocked by the developments. A commentary in the Neue Zuercher Zeitung read, “A zombie is gone but a monster is born.” The newspaper accused Credit Suisse of arrogance and pride, stating that there has been a massive destruction of value. The Tages-Anzeiger newspaper described the affair as a “historic scandal” and warned of brutal job cuts ahead.
However, UBS Chief Executive Ralph Hamers was confident that his bank was up to the challenge of making the takeover a success. “The takeover means that we are bringing back stability and security for CS clients,” he said. “But also that we are upholding 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. Chief Executive Urs Baumann wrote on Linkedin that “Zeurcher Kantonalbank offers all business areas of a universal bank and is thus a complement to the newly emerging big bank.”