Off the market: Roundup of the Credit Suisse merger and how it will affect you
On June 12, Credit Suisse and UBS, two of the largest banks in Switzerland, are expected to merge into what will become the largest financial institution in the country beyond the Swiss National Bank (SNB). Here is the story so far, what the merger will mean for workers at both banks, account holders at Credit Suisse (CS) and the country as a whole, as well as what future issues may arise from the deal.
UBS to officially acquire Credit Suisse on June 12
Earlier this month, it was announced that the UBS-Credit Suisse merger would be formally completed on June 12. While UBS has acknowledged that the merger will likely take years to complete, the date represents a crucial step when all formal contracts are signed to make the deal binding and official.
Credit Suisse, one of the largest and most esteemed financial institutions in the world, has been beset with scandals in recent years which have hurt the bank’s credibility and finances. This instability increased following a series of blunders beginning in November 2022 and continuing on until March 2023.
Events culminated on the week of March 13: when the firm announced a huge loss in revenue, Saudi Arabia’s national bank stated they would not invest any more money in CS and the company's stock price plummeted by 30 percent. The bank finally agreed to a 50 billion franc bailout from the Swiss National Bank (SNB) on March 16, after questions were raised about the firm's ability to cover its losses.
The denouement came on March 19, when following negotiations with the government, UBS moved in to acquire Credit Suisse for 3 billion Swiss francs. The move was sold as a way to prevent a massive shock to the financial system, with the SNB promising 200 billion francs worth of liquidity to make the deal happen.
Your questions about the UBS-Credit Suisse merger answered
The merger has sealed Credit Suisse’s 166-year history as an independent financial institution and created a so-called “mega bank” with 4,55 trillion francs in assets. With the peak of the scandal now in the rear-view mirror and the dust starting to settle, here is what will happen to Credit Suisse, and how customers, staff and Switzerland as a whole will be affected.
What will happen to Credit Suisse on June 12?
On June 12, UBS and Credit Suisse are expected to have signed all the legal documents that will make the merger a reality. From this date, Credit Suisse will be de-listed from the New York Stock Exchange - while the American SEC is yet to approve the motion to take CS off the market, Blick noted this is now a formality. The Swiss Stock Exchange (SIX) is likely to follow suit on June 13.
As per the deal agreed in March, people who still own shares of Credit Suisse will be given UBS ones, at a rate of one UBS share per 22,48 CS shares. Workers at CS will also become employees of UBS, and the bank will start to exercise CS's resources as if they were their own. Credit Suisse AG and UBS AG will continue to run as parent companies for the time being, until all assets are organised into one entity.
Will Credit Suisse still exist?
One of the key questions still hovering over the deal in March related to whether all customers of Credit Suisse would be moved over to UBS, and whether CS would cease to exist as a brand. Now this question has been answered.
Credit Suisse will continue to exist as a brand for the foreseeable future, with experts telling Blick that it will likely be between four and five years before the bank will cease to exist. In a statement given to 20 Minuten, UBS said that the two “will continue to act independently until further notice.”
However, UBS is expected to strip CS of its less profitable departments and order it to focus on those that continue to make a profit - like managing accounts in Switzerland, for example. Despite calls for the contrary, however, Credit Suisse will not exist in the long term.
Will the merger impact account holders in Switzerland?
For people with accounts, pensions, investment portfolios and mortgages with Credit Suisse, nothing will change for now. Accounts will continue to be run by Credit Suisse, although UBS is expected to create a supervisory umbrella for investment departments to make sure their interests and risk tolerances align.
Will cuts be made to Credit Suisse services?
For now, the people who will feel the impact of the merger most will be Credit Suisse employees. Sergio Emotti, CEO of UBS, warned that they will have to implement “painful” cuts in the coming months, meaning thousands of CS employees will lose their jobs. This will mostly affect those employed at physical stores across Swiss cities and cantons.
Credit Suisse crisis to be subject of parliamentary inquiry
Finally, the crisis will continue to be a hot-button issue with members of the Swiss government. After promising the 50-billion-franc bailout to Credit Suisse on the eve of the merger, the Swiss National Bank's promise of 200 billion francs worth of liquidity assistance is still on the table, alongside a 9-billion-franc loan pledged by the Federal Council.
On June 7, the National Council voted near-unanimously to launch a parliamentary inquiry into how federal authorities handled the crisis, with National Councillor Damien Cottier stating that "we owe it to the youth of this country to work so that such a crisis cannot occur in the future." The Parliamentary Commission of Inquiry (CEP) is the strongest investigative measure that parliament can implement, with officials now given permission to investigate the debacle from 2008 to the present day.
Discussions around the validity and consequences of the deal are also expected to continue, with many figures opposing the creation of what is now one of the largest banks in the world. On the flip side, the Federal Council has argued that the merger was necessary to prevent the crashing of the Swiss economy and world financial markets, adding that so far the government has actually made a profit out of the deal through loan repayments.
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