(MENAFN- Swissinfo) A fierce debate is raging in Switzerland about the wisdom of having a single giant bank. Some argue the country will benefit from an enlarged UBS, while others say it threatens the economy.
This content was published on March 27, 2024 - 09:00 6 minutes
When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz.
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UBS has emerged as Switzerland's sole global banking powerhouse after it bought its rival, Credit Suisse, in 2023.
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Active around the world, UBS combines wealth and asset management with investment banking and domestic retail services for individuals and companies. It also has a balance sheet twice the size of the entire annual Swiss economic output.
The Swiss Bankers Association (SBA) believes size equals strength when competing against other large banks worldwide.“If Switzerland wants to play the role of an international financial centre, it needs at least one large international bank,” the SBA argues.
Many politicians, including Peter Hegglin from the Centre Party, equate size with risk should UBS collapse.“The United States is better able to absorb such shocks thanks to its economic strength,” he told SWI swissinfo.“This is much less the case for Europe and Switzerland.”
Foreign bank exodus
One argument being made in favour of a large Swiss global bank is that it can better serve domestic multinational companies and exporters. Swissmem, a lobby group for the manufacturing industry, says it's convenient to have a bank that can handle international transactions, issue loans, hedge currency risks and offer access to the capital markets under one roof.
“A shared culture and common language are soft factors that should not be underestimated. Our companies must be able to rely on the bank to stand by them even in difficult situations,” Swissmem told SWI swissinfo in an emailed statement.
Swiss companies also felt abandoned by foreign-controlled banks that left in droves after the financial crisis, according to Swissmem. The number of foreign banks in Switzerland more than halved between 2008 (123) and 2022 (61).
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“This is a bad memory that still reverberates today,” the lobby group stated.
Swiss pharmaceutical heavyweight Roche also endorses the existence of a large global bank.“Swiss banks that have critical mass and are networked in the international financial system are of great value for multinational companies in Switzerland,” the company told SWI swissinfo in an email.“Larger Swiss-based banks facilitate the use of Swiss francs in business and financial transactions.”
Post-war boom
Switzerland has spent generations building up a powerful financial sector that punches well above the economic weight of the country. Private banks trace their roots back 250 years , but the Swiss financial centre turned into a true global force following the two world wars of the 20th century.
“After the Second World War, huge flows of capital came into Switzerland. It was an exceptionally strong growth period for the Swiss financial sector,” PhD economist Rebecca Stuart, who lectures at the University of Neuchâtel, told SWI swissinfo.“Many people thought it safer to hold their assets outside of their own countries, and Switzerland offered political and economic stability.”
More More Why a monster UBS bank scares Switzerland
This content was published on Mar 23, 2023 Some Swiss believe Credit Suisse should have been broken up and sold off in parts to foreign buyers to spread risk.
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